KRGV.com

AUSTIN, Texas (AP) Gov. Rick Perry on Tuesday credited spending restraint for igniting the Texas economy but also proposed digging into the state's cash reserves to pay for $3.7 billion in water and road improvements while returning any excess revenue directly to taxpayers.

Perry used his State of the State address to argue that Texas' economic outlook is bright enough that it can afford to cut taxes while spending a major chunk of the $12 billion in the so-called "Rainy Day Fund." Doing so answers calls from the business community to improve the state's infrastructure but signals a dramatic departure for Perry, who spent years building tea party support by imploring the Legislature not to touch the fund.

"Our bank balance is healthy, our economy is growing, our future is limitless," Perry told a joint session of the Legislature.

The longest-serving governor in state history, Perry also ignored calls from Democrats to use the fund to restore $5.4 billion in cuts to public education passed in 2011 amid a $27 billion budget shortfall sparked by a then-sluggish economy.

With unemployment down, state sales tax receipts up and the economy humming, Perry urged lawmakers to cut taxes, saying "providing at least $1.8 billion" over the next two years "is a good place to start."

He also wants to amend the Texas Constitution to allow the state to return tax money it collects but doesn't spend.

"Today, I'm calling for a mechanism to be put in place so when we do bring in more than we need, we'll have the option of returning tax money directly to the people who paid it," Perry said. "Currently, that's not something our constitution allows. We need to fix that."

About 64 percent of state revenues come from sales tax, so it's not clear how money could be returned proportionately. The rest of the revenue comes from the business margins tax and state fees.

The governor skipped some of his signature issues, not mentioning abortion, gun ownership rights or illegal immigration. He vowed again that his state would not expand Medicaid as directed under the White House's health care reform law, but Perry also refrained from his usual Washington-bashing.

He even said "Texas stands ready to do our part" and answer President Barack Obama's calls for unity as he started his second term. That wasn't as big a shift as turning away from his past stance on the Rainy Day Fund, though.

"While we cannot and will not raid the fund to meet ongoing expenses, we also shouldn't accumulate billions more than necessary," Perry said. "That's why I support a move to utilize $3.7 billion from the Rainy Day Fund for a one-time investment in infrastructure programs."

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STAAR 9TH GRADE PASSING RATES RISE AFTER RETESTS

Ninth graders who failed Texas' new, tougher standardized tests the first time they took them fared far better during retakes, state officials said Tuesday, a sliver of positive news for an exam regimen that has been roundly criticized in many educational quarters.

Students took the State of Texas Assessments of Academic Readiness, or STAAR exam, for the first time last year, and are now required to pass 15 separate tests to graduate high school. STAAR is designed to be more rigorous than the statewide exam it is replacing, TAKS, but the new exam was so hard that nearly half of the ninth graders who took the English I test didn't pass it. And, passing rates were under 80 percent for the English I Reading and World Geography exams.

However, students who retook ninth grade tests as 10th graders this year saw their scores improve dramatically, according to Education Commissioner Michael Williams.

The English I Writing passing rate jumped from 54.4 percent last Spring to 72.6 percent after retesting. In fact, passing rates for all subject areas improved, with English I Reading jumping from 67.7 percent to 81.2 percent; World Geography climbing to a 84.8 percent from 79.7 percent; and 91 percent of students passing Biology exams, up from 86.4 percent.

"The improvement in overall performance is directly attributable to the hard work of students and educators across our state," Williams said in a statement. "While there is still work to be done to ensure success for all, these improved numbers are indicative of what can occur when the focus is on students and a commitment to achieve success in the classroom."

The Legislature created STAAR amid calls from leading business groups and others that Texas schools weren't doing enough to prepare students for the demanding jobs of tomorrow. State law requires that exam results count 15 percent toward students' final grades in core subjects but Williams has suspended that rule the last two years, amid an uproar from teachers, parents and students, all of whom worried that kids' grades would suffer, thereby making them less attractive to college admissions boards.

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LAWMAKERS HOST VICTIMS OF TEXTING WHILE DRIVING

Texas Sen. Judith Zaffirini and Rep. Tom Craddick have brought the victims of texting-while-driving accidents to the Capitol to build support for a ban on the practice.

Family members recounted on Tuesday how their loved ones died in traffic accidents because someone was distracted by text messages on their mobile phones.

Craddick, a West Texas Republican, passed a ban in 2011, but Gov. Rick Perry vetoed it, calling it an infringement on personal liberty. Thirty-nine states already ban texting while driving.

Victims' families said a person who is texting while driving is twice as likely to cause an accident as someone who is drinking while driving.

Zaffirini, a Laredo Democrat, called on lawmakers to pass the measure again and for Perry to reconsider his veto.

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QUOTE OF THE DAY:

"I didn't know there would be that much excitement about tax relief." Gov. Rick Perry, after supporters gave him a standing ovation to drown out protesters who were shouting during his State of the State address.