The new University of Texas System chancellor, Dr. Francisco Cigarroa, called Perry's tuition proposal creative and said it provides a "wonderful opportunity to explore."
"We'll be meeting together over the next few days, working with our legislators to really kind of come up with a tuition plan that can be accessible, affordable and allow us to continue to grow the strength of our institutions," Cigarroa said.
Rep. Dan Branch, R-Dallas, a leader on higher education issues, said he supports increasing the Texas Grants Program and is keeping an open mind about proposals to reduce tuition costs.
To give small businesses some tax relief, Perry said he supports raising the business tax exemption to $1 million, up from the current $300,000 in gross receipts. The tax was put in place in 2006 to change the Texas system for funding public schools.
Perry uses the "State of the State" speech every two years to set out his agenda for the Legislature and to claim political ground for coming elections. This time the stakes are high because U.S. Sen. Kay Bailey Hutchison is challenging him in the Republican primary next year. Unlike some of his previous addresses to the Legislature, Perry's speech wasn't packed with new proposals. He emphasized what he said were programs and approaches that have worked well during his tenure.
Texas Democratic Party chairman Boyd Richie said Perry's speech should have been called the "state of Governor Perry's campaign" address. He said Perry's tuition freeze proposal is "a lame attempt to fix a problem he created."
Sen. Leticia Van de Putte of San Antonio, leader of the Senate Democratic Caucus, said Perry's priorities scapegoat immigrants, suppress voting rights, harm a woman's right to choose an abortion and give teachers incentives that teachers don't support. She said she was disappointed Perry made little mention of the hardships of those who have lost jobs in the recession.
"The Texas economy may currently be better off than most other states, but our unemployment rate ... has risen by 30 percent in the past year, and we are told the worst is yet to come," Van de Putte said.
The governor said he wants to place $150 million in a disaster contingency fund for catastrophes like Hurricane Ike to ensure that Texans' needs can be met without long waits on reimbursements from the federal government.
"We simply cannot, in good conscience, allow our citizens to shiver in a tent or sweat in the sun as Washington drags its feet on housing and reimbursements," he said, to applause from legislators.
Perry said he agrees with Republican Lt. Gov. David Dewhurst on requiring more voter identification. He also wants to spend $135 million on border security and combat gangs relied on by Mexican drug cartels. Perry advocated building more transmission and distribution lines to move wind and nuclear power across the state.
He proposed to "resolve the eminent domain issue once and for all in this session, so that Texans will not only have clarity, but so we also a strong defense of the private property rights we all hold so dear." Repeating his call from last week, Perry said he wants a state constitutional amendment to protect land owners from eminent domain abuses.
Among those watching Tuesday's speech were Joe Pojman, executive director of Texas Alliance for Life, a group Perry sides with in its attempt to create "Choose Life" specialty license plates. The group also backs a measure Perry is pushing to encourage adult stem cell research in the state.
"Expertise in this emerging and increasingly promising field will not only bring healing to the suffering and create jobs for Texans, it will also establish an appropriate firewall protecting the unborn from exploitation," Perry said of adult stem cell research.
Perry is attempting to shore up support among anti-abortion activists. Hutchison supports some abortion rights, though she says she favors current abortion restrictions and wants to reduce the number of abortions.
Perry also said he backs legislation to require women seeking an abortion to review an ultrasound of the fetus before proceeding.
The state Senate passed that measure in 2007, but the bill didn't make it to the governor's desk. Dewhurst said there is a strong majority in the Senate ready to pass the bill again.
The Texas Association of Planned Parenthood Affiliates said the ultrasound proposal does not have a woman's health in mind and that medical professionals shouldn't be ordered by the state what to tell patients.
"This legislation is a political tactic aimed at appeasing the Governor's primary base," the group's statement said.
Associated Press writer Jay Root contributed to this report.