Gov. John Kitzhaber delivered his state-of-the-state speech in the Capitol this morning. Kitzhaber told lawamkers, who are in organizational meetings prior to convening the regular session in February, that he needs their help in cutting public employee pension benefits and prison spending.

Kitahaber also included a high level of specificity on a couple of the biggest challenges facing Oregon: job creation and health care costs.

Kitzhaber reiterated some numbers he's touched on before in terms of job growth:

"The Oregon Business Plan, which has guided our work over the past two years, is built on three pillars: creating 25,000 jobs per year through 2020; raising Oregon’s personal income levels above the national average by 2020; and reducing Oregon’s poverty rate to 10 percent by 2020," Kitzhaber said.

That middle number is really important: Oregon lags behind the national average for per capita income by nearly 10 percentage points and lags Washington by 15 percentage points. If we were merely average, many of the state's fiscal problems would disappear.

The governor's bigger push is to dial back healthcare cost inflation. He's got more ambitious goals there:

Let me start with health care, which is perhaps the fastest growing cost for individuals, families, businesses and state government. The new care model being developed by our Coordinated Care Organizations is projected to hold medical inflation in the Medicaid program to 3.4 percent starting in the second year of this biennium. That will save $100 million in the general fund in 2013-15; nearly $200 million in the 2015-17 biennium and $400 million the following biennium. In other words, the delta created by holding medical inflation constant creates a huge and growing opportunity for reinvestment as we go forward.

Therefore, our long-term ability to reinvest in public education depends to a large extent on our success in proving up this care model in the next biennium and then to extend it into the private market. If, for example, we could move public school teachers and state employees into the same kind of high quality, low cost care model being developed by our CCOs, the estimated ten year state savings could be as much as $5 billion. This would be a game changer for state finances and could lead to a huge competitive advantage for Oregon businesses both large and small.