High on the list were job creation by borrowing money from the Unemployment Disability Fund. The goal is to get people back to work and paying taxes.
"You will receive a $500 million jobs package that we estimate could train up to 140,000 workers and help create 100,000 jobs," he said.
To help companies hire, Schwarzenegger wants to make it more difficult to block construction projects and limit lawsuits against businesses. Those are no-no's in the eyes of the Democratic majority.
"His job package calls for the rollback of environmental and consumer protection laws," Senate President Darrell Steinberg, D-Sacramento.
"We have tens of thousands of highly skilled, highly trained workers that need to go back to work in their field," Assembly Speaker Karen Bass, D-Los Angeles said.
To help ease future budget strains, Schwarzenegger renewed his call for sweeping changes to the state's pension and tax systems.
"The budget crisis is our Katrina, we knew it was coming. We've known it for years and Yet Sacramento would not reinforce the economic levees," Schwarzenegger said.
But until the fixes are in place, Schwarzenegger warns more pain is ahead because the state faces a new $21 billion deficit. He promised, though, to protect education and even went a step further.
"I will submit to you a Constitutional amendment so that never again do we spend a greater percentage of our money on prisons than on higher education," Schwarzenegger said.
Right now, 11 percent of California's budget goes to prisons, while 7.5 percent goes to higher education. Schwarzenegger proposed to bring down incarceration costs by privatizing prisons.
Schwarzenegger had some tough talk too aimed at the federal government, which continues to short-change California in the dollars that come back. He urged the state's Congressional Delegation to vote against President Obama's Healthcare Reform bill, which Schwarzenegger once supported. Speculation is he's using his support to leverage more federal aid to California.