HARTFORD — Gov.Dannel P. Malloyopened the 2012 legislative session Wednesday with plans for education reform, pension funding changes and the largest increase in funding for affordable housing since Gov. William A. O'Neill was in office more than 20 years ago.

The plans require multiple changes in the state budget, including $329 million in new funding and $120 million in spending cuts in a proposed budget of $20.729 billion for the fiscal year that starts in July. Malloy did not highlight any of the cuts in his second State of the State Address, but his budget summary shows that $4.8 million would be cut from the Connecticut Independent College Student grant that goes to students at in-state private colleges like Quinnipiac University in Hamden and Goodwin College in East Hartford. The cuts also include $629,000 from the Capitol Scholarship Program, while a separate category with nearly $30 million to aid students in public colleges would not suffer any cuts.

In the education session, Malloy is offering an overall plan that calls for $128 million in spending increases in various education categories. That includes an additional $50 million in educational cost-sharing funds that would go largely to the 30 school districts with the worst results on standardized tests. An additional $12 million will be spent on early childhood programs and $13 million for recruiting and developing teachers, particularly those who would work in the low-performing schools.

"We will require these districts to embrace key reforms or they will not get the money,'' Malloy told a packed House chamber in his second State of the State Address.

While the $128 million would be a clear boost in funding, it would represent a tiny percentage in a state that spends more than $5 billion annually on public education in 169 cities and towns.

As the economy remains sluggish and revenues have dropped lower than expected, the original projection of a surplus of $438 million in the next fiscal year has now been cut to a razor-thin surplus of $1.6 million – essentially a rounding error of far less than 1 percent in a budget of more than $20 billion.

In addition to adding more money for education, Malloy said he would reform the long-held tenure system in the public schools.

"I'm a Democrat. I've been told that I couldn't, or shouldn't, touch teacher tenure,'' Malloy said during a speech that lasted about 40 minutes. "It's been said by some that I won't take on the issue because it will damage my relationship with teachers. … This is the year to reform teacher tenure. So let's get it done.''

During last year's address to the legislature, Malloy also mentioned teacher tenure in a statement that surprised some observers as a bold move by a Democrat. But when the legislative session ended months later, no major reforms to tenure had been enacted by the Democratic-controlled legislature.

Besides education, the second biggest reform this year will involve state employee pensions, according to the Malloy administration. That includes pumping more money annually into the underfunded pension fund. Malloy says the various moves would save taxpayers nearly $6 billion over the next 20 years, but the legislature's nonpartisan fiscal office said recently that one of Malloy's calculations on pensions was wrong by $3.1 billion over 20 years.

In the tradition of opening day, it was a festive atmosphere Wednesday at the state Capitol – like opening day of a new baseball season. Politicians of all stripes came to the Capitol to meet and greet – and in some cases to solicit votes for future runs for office. Many of the former House Speakers arrived in an annual tradition, including past Speakers Thomas Ritter of Hartford, Moira Lyons of Stamford, and James Amann of Milford. Former U.S. Rep. Christopher Shays, who is running for the U.S. Senate in an August primary against Greenwich wrestling entrepreneur Linda McMahon, shooks hands with well-wishers around the building.

State Rep. Terry Backer, who has been battling brain cancer, received hugs from Senate Republican leader John McKinney of Fairfield and former House Majority Leader Bob Frankel. "You look good,'' Frankel told Backer.

"By the grace of God, I'm here,'' Backer said.

Malloy walked into the chamber at about 12 noon to loud applause from the bipartisan crowd. Even though Republicans and Democrats clash sharply under the Capitol dome, Opening Day is always a time for good cheer and bipartisanship.

In one of his first remarks, Malloy acknowledged Backer, along with three other legislators who have recently had health problems – Sen. Edith Prague, Sen. Edwin Gomes, and Rep. Gail Hamm. Those legislators received a round of applause after Malloy said, "We're very glad to see you here today.''

Malloy noted that Connecticut, like other states, had been facing a massive deficit last year that was partly a financial hangover from the huge downturn on Wall Street that started in September 2008. But after the largest tax increase in Connecticut history, the state has closed most of the gap and is teetering between a deficit and a surplus. Malloy, who controls spending in many state agencies, has pledged repeatedly that the state will end the fiscal year on June 30 in the black. Much of the funding has come from tax increases on income, sales, corporate profits, and cigarettes, among others.

"Make no mistake about it. We will end this year in the black,'' Malloy said in his State of the State Address.

Today, Malloy says the state has "passed through the crucible of that crisis'' and created 9,400 new, private sector jobs during the year.

"Ladies and gentlemen, it is time for us to lead again,'' Malloy told the crowd in the packed Hall of the House in Hartford. "Let's be big. Let's be bold.''