Gov. Laura Kelly on Wednesday challenged lawmakers to forge a path of prosperity for Kansas in the "Soaring '20s" that stands in contrast to a now-finished decade distinguished by financial chaos.

Delivering her second State of the State speech before the Republican-controlled Legislature, the Democratic governor outlined priorities for this year's legislative session, starting with Medicaid expansion, and threatened to veto any legislation that delivers steep tax cuts or jeopardizes funding for public schools.

"I want to be clear," Kelly said. "To protect our recovery, and to ensure Kansas does not repeat the mistakes of the last decade, I will veto any tax bill that comes to my desk that throws our state back into fiscal crisis, or debt, or sends us back to court for underfunding our schools. I hope you won’t stand for it either."

Her agenda also includes a comprehensive transportation plan, relief for taxes on food and property, and criminal justice reform.

Kelly delivered the annual address in the House chamber before lawmakers, Kansas Supreme Court justices, the governor's Cabinet and elected state officials. As the third woman to serve as governor of Kansas, Kelly pointed out that women for the first time are at the helm of all three branches of government. In attendance were Senate President Susan Wagle, the first woman to hold that title, and Marla Luckert, the second woman to serve as chief justice of the Supreme Court.

Kelly pointed to actions taken during her first year in office, which include fulfilling a promise to properly fund Kansas schools, investments in public safety, efforts to stabilize the foster care system, and improved state rankings in infrastructure and education. Pay was increased and health insurance premiums lowered for public employees.

In the past 12 months, Kelly said, the state added 12,400 private sector jobs and now has the lowest unemployment rate in 40 years.

Kelly recalled how 10 years ago, the state was in the throes of the worst economic downturn in 80 years. The Great Recession forced $1 billion in spending cuts, and a $400 million budget gap loomed.

"It was brutal," Kelly said. "It’s probably for the best that we did not realize, in that moment, that this would be the brightest fiscal outlook Kansas would have for another seven years."

After former Gov. Sam Brownback took office in 2011, Kelly said, the "saga of the failed tax experiment" launched Kansas into a self-inflicted crisis.

"By the time I stood before you as governor in 2019, Kansas was on life support," Kelly said. "The state had racked up record amounts of debt, schools had been cut to the bone, taxes on groceries had been increased until they were the highest in the nation, agencies had been decimated, and Kansas had generally become a national model for what not to do."

Six times, Kelly praised bipartisan efforts to advance legislation — including the Medicaid expansion deal she announced last week with Senate Majority Leader Jim Denning.

Last year, Denning blocked the extension of KanCare, as Medicaid is known in Kansas, to an additional 130,000 low-income Kansans. Their compromise legislation would make coverage eligible to families that earn up to 138% of the federal poverty level and has the potential to lower premiums in the marketplace.

Kelly said the studies last year demonstrated Medicaid expansion has an impact on mortality rates, maternal health, opioid addiction and hospital closings.

Kansas would become the 37th state to expand Medicaid under terms of the Affordable Care Act. No state has reversed its decision, Kelly said.

"When we add this to our list of bipartisan accomplishments, we will not only save lives, it will close the book on a long, senseless, expensive political fight — making room to improve access to health care and grow the Kansas economy," Kelly said.

In a news conference after the governor's speech, Senate President Susan Wagle, R-Wichita, said the state shouldn't extend health care under Medicaid to able-bodied adults without children while the state continued to have people with disabilities on waiting lists for services.

"I wish she would address all those who the safety net was meant for — people who have disabilities," Wagle said. "People that have been waiting for services for many years, who deserve those services."

Wagle said she expects the Kelly-Denning plan to pass but hopes to amend it first.

Kelly also encouraged lawmakers to approve a comprehensive plan for the Kansas Department of Transportation to rebuild roads and bridges across the state. The new plan would replace the expired T-Works program.

The governor vowed to carry out her promise to close the "bank of KDOT" by phasing out annual sweeps from the highway funding plan that have propped up the state budget.

"It’s the means by which our school buses safely transport our most precious cargo," Kelly said. "It’s how we make Kansans’ daily commutes faster and safer so they can spend more time with their families. It means jobs. Thousands of jobs. It’s the gateway to rural broadband. And as an export state, it is how we get Kansas goods to market and keep our economy humming."

Investments in transportation, education and health care require fiscal stability, Kelly said. She said the budget she presents to the Legislature on Thursday will continue rebuilding efforts while paying down debt and honoring her promise to cut taxes.

The goal, Kelly said, is to rebalance revenue streams between income, sales and property taxes. Kelly said her budget will offer property tax relief and lower taxes on groceries for Kansans who need help the most.

"I understand that any discussion of taxes is politically charged," Kelly said, "but if we ever truly want to move forward, we must confront the stark inequities, outdated inefficiencies and expensive loopholes riddled throughout our tax code."

Kelly credited the $30 million investment installed by the Legislature a year ago with easing a crisis of staffing shortages and overcrowding in state prisons.

To make additional progress, she tasked Corrections secretary Jeff Zmuda with reducing recidivism through programming that includes partnering with businesses to train inmates.

Those efforts, she said, have laid the groundwork for a discussion on criminal justice reform.

Kelly concluded her remarks by encouraging lawmakers to accomplish shared goals by acting together. The state already has "stunned" outsiders, she said, who had written Kansas off after watching the turbulent events of the past decade unfold.

"My hope is that 10 years from now, when this body convenes the first session of that new decade, it will look back and remember this as the Soaring '20s — a decade when we lived up to our motto Ad Astra Per Aspera," Kelly said.