Democratic Gov. Chris Gregoire wants to combat the state's high unemployment rate by drawing new businesses to the state and creating up to 40,000 new jobs this year.

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Democratic Gov. Chris Gregoire wants to combat the state’s high unemployment rate by drawing new businesses to the state and creating up to 40,000 new jobs this year.

In her State of the State address Tuesday, Gregoire (pronounced GREG’-wahr) told a joint session of the House and Senate that she wants to attract $2 billion in capital investments to fuel job growth in fields like biotechnology, software development and renewable energy.

“We owe it to our families to provide job opportunities,” she said.

Gregoire also proposed a new employee tax credit for every small business that hires a new full-time employee. She said that she is going to direct state agencies to enact a green building program to retrofit state buildings to create immediate jobs.

The state’s unemployment rate has hovered around 9 percent since summer, and the state’s chief economist expects it to peak at about 9.8 percent this spring. Gregoire noted that in some parts of the state, unemployment has surpassed 14 percent.

“We need to get Washington back to work,” she said.

Gregoire said she will create a Clean Energy Business Development Program to help attract new businesses to the state and to “position Washington to be a leader in the clean energy economy and keep us competitive globally.”

“With the world moving toward a smart electrical grid, we will actively work to attract those businesses to invest in and create jobs in our state,” she said.

Gregoire’s speech came a day after the start of the 60-day session in which lawmakers have been tasked with patching a $2.6 billion budget deficit.

“It’s an understatement to say this year will be incredibly challenging,” she said. “It will test us – and the values we hold – like no other year.”

Gregoire was set to unveil her second installment of her budget proposal Tuesday afternoon, and she said that new taxes, along with cuts to programs, will be needed to balance the state budget.

She said that while her all-cuts budget proposal in December was balanced, it goes against her values and of the state.

“It would be unjust, unwise and unfair to abandon our friends and neighbors when they need us the most,” she said.

Gregoire said that when she introduces her budget later in the day, it will count on new revenue of about $750 million to buy back some programs she cut in her December budget proposal. Some of that may come from new federal dollars, but Gregoire said cuts of nearly $1 billion will still be necessary.

“We cannot just cut or just tax our way out of this immediate budget shortfall,” she said. “We must have a responsible, balanced approach of painful cuts and new revenue.”

Gregoire began her speech with a moment of silence for law enforcement and military service members who had been killed, saying they were “my heroes.”

Gregoire then called for changes following the recent killings of police officers in the state, saying that she wants improved communications throughout the justice system and improvements in the bail system.

Six officers have been shot to death since October, and Gregoire said that the state must “ensure that the legacies of these fallen heroes survive by giving their families the support that they deserve.”

She told lawmakers that she wants to expand survivor benefits, including retirement benefits.

Gregoire said that, with input from the law enforcement community, the measures “ensure that from tragedies we learn, we take action and we do the right thing.”

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