Gov. Butch Otter asked the Legislature to cut public schools by more than 5 percent, higher education by 10 percent and agencies that oversee economic development and state parks by more than 50 percent.

In a State of the State Speech colored by the worst economic times in decades, Otter proposed a state budget more than 7 percent smaller than the one he and lawmakers approved last year — bolstered by a $75 million infusion from the state’s $300 million in budget stabilization funds.

The cuts will be tough, he said, but these tough times give the state an opportunity to restore itself to “the necessary and proper role of taxpayer- funded government services.”

Transportation tax and fee increase:

Otter continued his push to raise money for transportation needs, though, proposing a plan that would phase-in increases in gas taxes, vehicle registration fees, car-rental taxes and more — ultimately raising more than $174 million a year after five years.

He also directed the Idaho Tax Commission to study what sales tax revenues come from car parts, tires and other related purchases, with the idea that this money could be directed to roads some day. And he proposed a new look at truck registration fees, to make sure everyone is paying their fair share.

Education cuts:

Otter protected k-12 public education from emergency cuts this year, but said he couldn’t balance the budget without taking money from the state’s single largest state expenditure.

Still, Otter said, the $1.425 billion schools budget makes up half of what he would spend in fiscal year 2010.

And he announced a reversal in a shift that had occurred over the past several years. Otter decided to revert power over more day-to-day education programs away from the governor-selected Board of Education and back to the Department of Education, run by the elected state superintendent.

Budget cuts and economic development:

Otter’s first attempts at requiring zero-based budgeting — exploring every dollar spent by an agency, instead of simply assuming that each year’s budget will be the base budget for the next one — found some savings in the departments of Agriculture and Water Resources.

“It is my intent to continue an unrelenting scrutiny of state government programs that use Idahoans’ hard-earned dollars,” he said.

The two biggest cuts came with the Department of Commerce — 51 percent — and Department of Parks and Recreation — 54 percent.

But Otter said he wasn’t abandoning a focus on recruiting new businesses and encouraging the growth of existing ones.

He announced a new statewide development plan —called Project 60 — that will be led by the new pared-back Commerce but include every state agency.

His goal: “to encourage and create a climate that enables visionaries like the Simplots, Albertsons and Morrisons of yesterday — and like the Parkinsons, Hagadones, Vandersloots and Sayers of our own generation — to create more jobs and brighter futures for Idaho families and communities.”

Better times ahead:

Otter said he had no doubt the state would survive and would thrive in new ways.

“Idaho also was struggling through a rough patch in our economy when I served as lieutenant governor in 1987,” he said. “Back then, people were saying the state of Idaho might as well just turn out the lights and quit — that things would never be as good again as they had been prior to that economic downturn.

“Well, they were wrong then, and the naysayers are just as wrong now. I’m not wearing rose-tinted glasses. But I am a glass-half-full kind of guy.”