Gov. Jerry Brown mixed optimism and harsh fiscal reality Wednesday in a State of the State address that reflected California's split economy.

Brown brushed off "dystopian journalists" and Republican critics "who sing of Texas and bemoan our woes," pointing out that half of U.S. venture capital investments are being made in California. He cited the state's dominance of new patents, its wealth of Nobel laureates and gains in personal income and employment. "California is on the mend," Brown declared.

Like the rain in this week's weather forecast, that's welcome news for a state that's been mired in a long economic drought. But those gains don't mask the fact that the state's finances are still lagging.

And that leaves Brown in the same situation he was when he delivered his first State of the State address a year ago — coping with a budget deficit that shortchanges education and prevents the state from investing in infrastructure improvements, such as transportation and water-deliver systems, that nurture economic growth.

This year's shortfall is considerably smaller — $9 billion vs. $26 billion — largely because of deep spending cuts approved last year. As he did a year ago, Brown is seeking a mix of spending cuts, mostly targeting health and welfare programs, and temporary tax increases.

"Neither is popular, but both must be done," he said. "In a world still reeling from the near collapse of the financial system, it makes no sense to spend more than we have."

Brown understands that California can't cut its way to prosperity. His budget plan includes difficult trade-offs, eliminating safety net programs such as Healthy Families in favor of preserving funding public schools and infrastructure.

Wisely, he also wants to give local school districts more control over education spending, fulfill his promise to help counties pay the cost of housing low-level inmates and to begin reducing the cost of public employee pensions.

Much of his speech could have been delivered by one of his Republican predecessors. And more than any recent governor, he has delivered on promises to cut spending.

As Los Angeles columnist George Skelton pointed out Tuesday on these pages, at $5.14 per $100 of income, general fund spending per today is lower than it was in 1972, Ronald Reagan's final year as governor. The tax burden also is lower, $6.45 per $100 of personal income, compared to $6.89 in Reagan's last year.

Yet the governor was unable to secure the four GOP votes he needed last year, not to raise taxes but to simply call an election on his tax proposals. This year, he's going straight to the voters with an initiative to raise sales and income taxes for five years.

If he can deliver on his reform proposals, voters will have reason to say yes, proving Brown right when he said, "California has problems, but rumors of its demise are greatly exaggerated."