But he did not reveal the cost of the tax relief program, which must be approved by state lawmakers. They were expecting not just Cayetano's initiatives, but also his explanation of how he will balance the budget.
Cayetano acknowledged that some will wonder where the state will get the funds to cover the lost revenue. "Let me just state that we have accounted for every proposal, dollar for dollar, in our financial plan," he told the joint session of the House and Senate. He did not elaborate.
Cayetano's initiatives are aimed at energizing key segments of the state's major industries: tourism and construction. They also aid other businesses, low-income residents and users of long-term health care, which can be costly, and they provide an incentive for post-high school education.
Specifically, Cayetano's proposals call for:
A two-year period in which hotel operators can renovate their properties and claim the entire cost of the 4 percent general excise tax on their improvements as an income tax credit. This will help to bolster the number of first-class hotel rooms in Waikiki when the state convention center opens, Cayetano said.
The elimination of the excise tax on out-of-state work done by local architects, engineers and consultants, allowing them to compete more equitably with their counterparts from the mainland and other parts of the globe. This proposal already appears to have wide support in the Legislature.
A 2 percent income tax credit - with the maximum at $4,000 - for first-time buyers of affordable homes. The program over the next two years should help boost the sales of affordable homes and create more home construction activity, Cayetano predicted.
An 18-month moratorium on the collection of excise taxes for businesses on Kauai and Molokai. The two islands have been especially hurt by the state's economic downturn.
The elimination of the current $27 food tax credit available to every taxpayer and replacing it with an income tax reduction of 25 percent to 100 percent for taxpayers earning less than $22,000 annually. This will aid low-income residents and, coupled with another initiative, encourage post-high school education, Cayetano said. It will aid at least 250,000, he said.
A $5,000 tax deduction for all post-high school tuition costs.
A maximum $50,000 tax deduction for qualified long-term health care.
Cayetano's tax relief package could resonate well with the isles' business community. Before his speech, business leaders such as Lawrence Johnson, chairman of Bancorp Hawaii Inc., and J.W.A. "Doc" Buyers, chairman of C. Brewer & Co., were clamoring for increased support for tourism, the state's economic engine, and for tax incentives.
Cayetano also re-emphasized his strategy of speeding up state construction projects with his $1 billion building program for the next two fiscal years that begin July 1. "We will work with the City and County of Honolulu to revitalize Waikiki," he said. "We will open the convention center on time. We will dredge and improve the Ala Wai Canal."
Answering critics who fear the heavier debt service of his expanded building program - more than double what the state usually does - Cayetano said: "Despite all the benefits of an expanded construction program there has been criticism that we can't afford to do it. On the contrary, we can't afford not to do it.
"The construction sector has lost nearly 10,000 jobs in the early 1990s. We need to put them back to work."
Cayetano also acknowledged the importance of the tourism industry, telling lawmakers he will be sending them an emergency message for an additional $10 million for the Hawaii Visitors and Convention Bureau for marketing and promotion.
"While tourism remains a primary industry, we should continue to encourage economic diversification," Cayetano said.
He added that his efforts to make Hawaii a world-class health center for the Pacific Rim is taking shape, noting that the respected University of Texas M.D. Anderson Cancer Center in Houston "is likely to form a cooperative relationship with our hospitals and doctors in the near future."
Cayetano also stressed welfare reform, education, crime and native Hawaiian issues, a matter which has divided the state.
With the federal government having turned over to the states the bulk of the responsibility for welfare programs, Cayetano called on the private sector to work with the state in providing jobs for welfare recipients.
Cayetano declared he is distancing himself from last year's federal welfare reform law that withdraws federal welfare funding for legal immigrants. He has long criticized that provision.
"And even though the federal government is withdrawing funding for legal immigrants, this governor will not do it in Hawaii," Cayetano said.
"It is not right. It is wrong."
Joining with House Speaker Joe Souki, Cayetano agreed it is time to return to having an appointed Board of Education.
A board appointed by the governor will make the governor fully accountable for public education and end blurred lines of responsibility, he said.
Cayetano added he is proposing an extended school year.
Hawaii's school year is 180 days - the shortest in the nation - and that has been a disadvantage for isle schoolchildren, who have low standardized test scores, Cayetano said.
Although he did not state it in his speech, the state has offered the teachers' union a contract proposal to extend the school year by 10 days.
Cayetano also declared that he wants retired school instructors brought back to the classrooms for a limited time - perhaps four years - because the early retirement law from a few years back pulled out more than 900 teachers, "taking with them invaluable classroom experience which the (Department of Education) was unprepared to replace.
"The early retirement law was a mistake," he said.
"It is doubtful whether it produced any savings, but it is very clear that too many of our most experienced teachers left the classroom prematurely" Cayetano said.
"Our children needed experienced teachers back in their classrooms."
Adding his voice to what has been a legislative chorus proclaiming its intention to get tough on crime, especially juvenile and drug offenders, Cayetano promised to push for more prison space in all counties.
He also said state Adjutant Gen. Edward Richardson will be developing a security watch program in neighborhoods that do not have one. Volunteer national guardsmen will be used.
The program will be called Na Koa Watch.
On the divisive issue of ceded land revenue - which the semiautonomous Office of Hawaiian Affairs wants a larger share of despite Cayetano's fear that it could bankrupt the state - the governor proposed the formation of a task force of community leaders to have OHA and the administration work out a settlement.
"It is truly important that we resolve this matter in a way that is fair to all of the people of this state," Cayetano said.
And to aid more native Hawaiians in getting their own homes, Cayetano said the Department of Hawaiian Home Lands is introducing new financing methods such as a rent-to-own policy to qualify native Hawaiians who might not qualify under conventional means.
"We all love Hawaii," Cayetano said.
"We want a future for Hawaii with productive, well-educated people with high quality jobs in a diverse economy.
"A smart economy, where Hawaii has the latest technology and the value added is knowledge."