Gov. Arnold Schwarzenegger’s State of the State address on Jan. 6 served as a primer for upcoming policy decisions that will be settled in the January budget revision and the March primary’s ballot initiatives.

Schwarzenegger has already worked diligently to assess California’s economic situation and compose solutions. While the fruits of those accomplishments were discussed, the toughest decisions for Schwarzenegger to make will have to be spelled out later this week in his budget proposal.

When speaking about higher education, Schwarzenegger admirably delivered a plan to cap student fee increases at 10 percent per year year after UC students saw a devastating 30 percent hike in the last 12 months. But while the governor works to keep California’s public colleges affordable, he must recognize that the quality of instruction and research at the University of California must not be diminished further than the $1 billion-plus already slashed from a crucial engine of the state’s economy.

Restoring the economy, Schwarzenegger said, was his utmost priority. His plans to reform the atrocious worker’s compensation laws and lobby businesses throughout the world to come to California are right on. However, he should also use his action-star clout in Washington to chime in on free trade agreements that have sent jobs across borders and overseas ‹ especially high-tech positions in Silicon Valley that were once a cornerstone of the state’s tax base and have recently been treated as exportable commodities.

Further, decentralizing K-12 education will devastate the funding of already impoverished rural and inner city schools, leaving California’s young people more unprepared for an increasingly competitive job market.

Schwarzenegger must address these issues in the coming months if he wants to guide the state back to prosperity.