AUGUSTA – Gov. John Baldacci said Wednesday the state of the state is strong despite serious challenges and he is “determined to meet the future head on” by streamlining government, developing Maine’s energy resources and revving up job-generating efforts.

Noting that the state faces a $95 million revenue shortfall and that the national economy is struggling, Baldacci pledged not to raise taxes. But he also drew a standing ovation when he said health care should not be denied to anyone who needs it.

“We will not take from our financial reserves to balance the budget,” Baldacci said in a speech to a joint legislative session that was carried by statewide television and radio. “And we will not increase taxes.”

The Democrat’s tax pledge drew praise from the House Republican leader, Rep. Josh Tardy of Newport, who said, “I’m very pleased with the governor’s commitment to not raise taxes.”

State House security was turned up a notch as metal detectors were put in place before the speech, which was given a day in advance of the unveiling of his bill to make revisions in the state budget. Baldacci has already ordered $38 million in spending curtailments to address the revenue shortfall through the end of this fiscal year.

Besides the state budget pressures, home heating oil and gasoline prices are at record highs and the national economy is struggling, the governor said.

But Baldacci said the state has weathered severe budget problems in the past while avoiding raising taxes.

“Today I am proud to say that we are better prepared [and] more able to weather economic storms,” he said.

Still, Maine taxpayers can no longer afford government systems built in the 1950s, Baldacci said.

“We must transform government at all levels. We must strengthen it to meet the demands of a new age. And we must prioritize our spending. Government has an important role to play, but it cannot be all things to all people,” he said.

While 600 state jobs have been trimmed since 2003 and some public functions consolidated, the second-term governor said more needs to be done. He promised to introduce legislation Thursday formalizing a proposal he floated last summer to unify the state prison system with the 15 county jail administrations.

The budget will seek to reduce Maine’s four Cabinet-level natural resource departments to two to reduce the number of central Health and Human Services offices from 10 to six and to consolidate management of DHHS, one of the state’s largest agencies.

The governor said his budget will ask that Maine’s three largest purchasers of health care – the Maine State Employees Health Commission, the University of Maine System and the Maine Education Association – use their combined buying power to lower drug costs while increasing the money available for health care for retired teachers.

Baldacci promised more steps to expand the state’s Dirigo Health system and expressed optimism that nonprofit Harvard Pilgrim’s entry as Dirigo’s new partner will stimulate new competition in Maine’s health care marketplace.

While Maine is in a January thaw now, Baldacci said winter “has already shown its teeth” and that many Maine families are already struggling with high energy costs. He made a pitch for contributions to the Keep Maine Warm Fund, which provides emergency fuel assistance, and thanked L.L. Bean Chairman Leon Gorman for the company’s $250,000 donation.

The governor pointed to positive trends in his speech, saying Maine has made great strides in developing wind power “and will rewrite the rulebook to make wind development easier without compromising our environment.”

He called for new partnerships with Canadians to reduce the cost of electricity in Maine. He announced a Wood-to-Energy initiative to bring Maine-made sources of heat to homes and businesses.

Baldacci, noting that 4,400 jobs had been created between November 2006 and November 2007, said he will seek to step up economic development efforts by encouraging closer cooperation and partnership between local and regional agencies.

The governor said $500 education grants available to every child born in Maine through the Harold Alfond Foundation “create[s] a legacy for our children.”

Baldacci drew a standing ovation when he said he and his wife Karen celebrated their 25th anniversary the previous day.

In the Republican response, Senate Minority Leader Carol Weston of Montville called for tax relief and education reforms.

“The governor’s reforms are aimed at keeping us afloat, but we need reforms that move us forward,” said Weston.

Without being specific, Weston called for new health insurance options that will create opportunities all Mainers can afford.