Gov. Christine Gregoire on Tuesday cautioned lawmakers against dipping too deep into the state's projected $1.4 billion budget surplus. With the state expected to...

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OLYMPIA — Gov. Christine Gregoire on Tuesday cautioned lawmakers against dipping too deep into the state’s projected $1.4 billion budget surplus.

With the state expected to slip back into the red by next year, Gregoire has proposed setting aside nearly two-thirds of the surplus.

“I know some of you want to spend more money — so did I,” Gregoire said during her first State of the State speech. “I know some of you want to cut taxes. So did I.”

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Sticking mostly to familiar themes and well-trodden sound bites, Gregoire’s speech gave a broad outline of her agenda for the 60-day legislative session that convened this week. For instance, she called for putting an increased emphasis on early-childhood education, promoting biofuels to reduce the state’s reliance on foreign oil and doing more to clean up Puget Sound.

She also hailed Olympia’s biggest achievements from last year, most notably the landmark $8.5 billion transportation spending package that voters upheld last fall.

“We had a good year,” Gregoire said. “But you know what? We aren’t done yet.”

Gregoire was greeted warmly by lawmakers from both sides of the political aisle. It was a sharp contrast to a year ago, when most Republicans, still fuming over the 2004 election controversy, gave Gregoire’s inaugural address an icy reception.

It also helps that the state’s economy, which was still reeling from several years of recession when Gregoire took office, is humming now. The turnaround has led to a sharp increase in state tax collections.

Democrats noticed she seemed considerably more relaxed this time. “Last year she was more of a lawyer,” said Rep. Hans Dunshee, D-Snohomish. “I think she sounded a lot more human.”

Democrats also largely agreed with the budget proposals briefly outlined in the speech.

Last month, Gregoire proposed spending about $500 million of the added revenue largely on what she calls “targeted investments” in education and health care and shoring up the state pension system.

She proposed putting the rest in a variety of savings accounts to help spare the state from the budget roller coaster it has been on for years.

“We spend when we have a surplus and we struggle to make painful cuts when the economy slumps,” the governor said. “It is time we even out the road.”

But there was no mention of setting up a constitutionally protected rainy-day fund — something Gregoire promised to fight for during her 2004 election campaign. Such a reserve would be harder for lawmakers to tap.

In a recent interview, Gregoire said she doesn’t “have the time right now” to push for the necessary constitutional amendment, which both the Legislature and voters must approve.

Republicans disagreed with Gregoire’s statement that her budget is “practical, prudent and responsible.” GOP leaders in the House and Senate said they were concerned some of the programs Gregoire wants to spend money on would lead to increased costs in future budgets.

They also say they don’t think the governor is doing enough to pay off a multibillion-dollar hole in the state pension system. “We don’t agree with her funding on pensions. We don’t think she goes far enough,” said Senate Republican leader Mike Hewitt, R-Walla Walla.

Gregoire spent a good portion of her speech talking about the need to maintain high standards for public-school students.

The Washington Education Association, the state’s largest teachers union, wants lawmakers to dump the Washington Assessment of Student Learning as the main graduation requirement. Business groups, Superintendent of Public Instruction Terry Bergeson and Gregoire want them to keep it.

Gregoire said she’s traveled “to Europe and Asia and witnessed firsthand our competition and, believe me, we don’t let our children down with high standards. We let them down if we retreat. And we fail them again if we do not prepare them to succeed.”

Ralph Thomas: 360-943-9882 or

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