MONTGOMERY — Gov. Bob Riley began a recession-driven legislative session Tuesday night by urging lawmakers to enact tax breaks to revitalize Alabama’s ailing economy and pass a stronger ethics law to rebuild public confidence.

Riley’s seventh and next-to-last State of the State speech was a pep talk for Alabama residents feeling uncertain about the state and national economies.

He recalled 2003, his first year in office, when state government faced the biggest budget deficit since the Great Depression. He recounted how state officials used strict budgeting and aggressive job recruiting to spur Alabama’s economy and produce a record surplus.

“Ladies and gentlemen, we turned our economy around before. We can do it again and we will do it again,” Riley said.

It must be done without raising taxes or expanding gambling, he said.

To help lower Alabama’s 6.7 percent unemployment rate, Riley encouraged the Legislature to approve tax credits for businesses that hire people out of work and those that create jobs in counties with the highest unemployment rates.

He also proposed expanding the tax breaks that Alabama now gives to new and expanding manufacturers. He said the tax breaks should also go to research and development companies, corporate headquarters and the emerging green economy.

Democratic Lt. Gov. Jim Folsom Jr. said Riley’s business proposals will be well received because the Legislature has a history of passing business tax breaks.

But House Majority Leader Ken Guin, D-Carbon Hill, called Riley’s proposals “typical Republican banter.” He said Alabama’s economy would be helped more by approving a Democratic plan to remove the state sales tax on groceries.

Besides proposing tax breaks for businesses, the Republican governor encouraged the Democrat-controlled Legislature to strengthen the state ethics law, which sets conduct rules for state officials.

His proposal comes amid an ongoing investigation of Alabama’s two-year colleges. It has resulted in convictions and guilty pleas from the former two-year college chancellor, the former director of the Alabama Fire College, two legislators and several school employees.

“When we have headlines about scandals and convictions at the same time we are trying to recruit new industry to this state, it’s like driving with one foot on the brake and the other on the gas,” he said.

Riley’s plan would give subpoena power to the State Ethics Commission to investigate complaints against public officials. The plan also would require lobbyists to report all money they spend entertaining public officials, and make officials disclose any ownership or contracts they or their spouses have with anyone that receives state funding.

“When you pass this reform, it will send a message loud enough to be heard in every boardroom and every living room. Corruption has no home in Alabama,” the governor said. His remarks prompted a standing ovation.

House Minority Leader Mike Hubbard, R-Auburn, said the Legislature has blocked ethics proposals in recent years, but the timing may be right for Riley to succeed.

“The public has lost confidence in public officials. Anything we can do to increase confidence we ought to do,” Hubbard said.

In the State of the State speech, the governor recounted how he and the Legislature had already cut state spending this year and warned that more difficult choices must be made in the 2010 state budgets because of declining tax revenue. But he encouraged legislators to protect funding for education programs that are improving student performance, including the Alabama’s reading, math and science initiatives and the distance learning program that will offer advanced courses in all Alabama high schools by August.

The governor did not name what programs he wants to cut in the 2010 budgets. That news will come Wednesday morning when he unveils his budget recommendations.