SACRAMENTO -- Gov. Schwarzenegger declared a spending crisis Tuesday during his first State of the State address but pledged to fund the University of California at Merced, which needs millions of dollars to open in 2005.

The promise -- leveled among talk of California's fiscal woes -- is a gem for the central San Joaquin Valley, which eagerly awaits completion of the new UC campus.

"Like our K through 12 schools, our colleges and universities must also share the burden of the fiscal crisis, but we must work to expand the dream of college," Schwarzenegger told the 120-member Legislature gathered on the Assembly floor. "We must not let the dream bypass our Central Valley. That is why my budget is funding UC's 10th campus -- UC Merced."

Carol Tomlinson-Keasey, chancellor of UC Merced, said she hopes Schwarzenegger's budget includes the $20 million the college needs to open next year. The state Legislature delayed UC Merced's opening from fall 2004 until fall 2005.

"I am really pleased that he sees this is part of the solution of the educational and economic issues in the Central Valley," Tomlinson-Keasey said. "He is wanting to make California a climate that is favorable to business. We are a business. ... We generate jobs."

Valley lawmakers were just as happy about the news. Assembly Member Nicole Parra, who attended the University of California at Berkeley, said she knows the importance of having a university nearby.

"They can hop in their cars and go see the outreach efforts," said Parra, a Democrat from Hanford. "We have enough prisons in the Central Valley. Children see them from their homes. We need to all see and support a UC in the Valley."

Sen. Jeff Denham, a Salinas Republican, said Schwarzenegger's decision to single out UC Merced in his address indicates that he cares about the Valley.

"UC Merced has taken a great deal of criticism statewide," Denham said. "It shows his pro-education stance and focus on the Valley."

Assembly Member Sarah Reyes said she was glad Schwarzenegger mentioned UC Merced but hopes his commitment to the Valley doesn't stop there. She said Schwarzenegger's address fell short on details, calling it a "good political stump speech," and she is looking forward to reviewing his budget.

"He didn't give us details. Again he is saying, 'Trust me,' " said Reyes, a Fresno Democrat. "I want him to be honest about California."

Tuesday's speech began a campaign to push a $15 billion bond measure, which will be on the March ballot. Schwarzenegger's administration will spend the next 10 weeks delivering its message to voters.

"Together, we put measures on the March ballot that, if passed by the people, will save our state from a June bankruptcy," Schwarzenegger said. "June is the month when billions of dollars in past loans come due and the financial house of cards built over the last half decade is set to collapse."

The alternative, Schwarzenegger said, is "economic chaos."

Schwarzenegger ousted Gov. Gray Davis in the October recall election and since has enjoyed several victories, including rolling back the unpopular tripling of the car tax and repealing a law that would have allowed undocumented immigrants to have drivers licenses.

His next milestone will come Friday, when he releases his eagerly awaited budget proposal. Schwarzenegger on Tuesday was vague about his budget -- including what he will cut -- but said everyone must work together to get California financially back on its feet. He pledged not to raise taxes.

The governor said he will launch an extensive review of government to make it more efficient and better serve taxpayers.

Sen. Dean Florez, a Shafter Democrat, applauded Schwarzenegger's plan to curb waste: "I was very happy that he spoke of waste, fraud and abuse. I hope he is able to stand up to the bureaucracy as he did tonight."

The governor said he wants to improve the state's business climate. He advocated for jobs -- saying he will become the state's "job czar" -- and pointed to workers' compensation reform as key.

Assembly Member Steve Samuelian, a Clovis Republican, said he was impressed with the governor's tenacity about workers' compensation reform: "Workers' compensation is a huge issue in this state. It's breaking the backs of small business owners."

If the Legislature doesn't deliver "real" workers' compensation reform by March 1, Schwarzenegger said he will take the issue to voters in November.

GOP Sen. Chuck Poochigian, who is carrying the governor's workers' compensation plan in the Legislature, said the deadline is attainable. Senate President Pro Tem John Burton, however, said it is unrealistic.

"California employers are bleeding red ink from the workers' comp system. Our high costs are driving away jobs and businesses," Schwarzenegger said. "Modest reform is not enough."