Gov. Christine Gregoire faces another tough, close fight from Republican challenger Dino Rossi in her bid for re-election.

Seeking a second term in the seat she barely won four years ago, Gregoire said she would take the state forward and wisely manage her way through potential budget deficits.

“I am the governor who’s going to stand up, make the tough choices, bring hope and greatness to the state of Washington, be responsible in how we manage and make us the proudest state in this entire country,” she said.

Gregoire, who served 12 years as state attorney general, squeaked into the governor’s mansion in 2004 by just 133 votes, after three ballot counts and a six-month court battle.

Supporters say Gregoire has served the state well during relatively good times. They say she is a good bet for a future likely to be less rosy economically. Especially for uncertain times, she’s a much more proven leader than her Republican rival, supporters point out.

While Republicans blame the projected shortfall on Gregoire, saying she spent way too much money, Gregoire points to President Bush.

“The blame goes squarely to Washington, D.C. This is the worst economic situation we’ve faced since the Depression,” she said. “We’re going to blame that on the Washington state Legislature and the governor?”

Rossi, meanwhile, said it is time for a change in wake of difficult economic times. He claims to be running as an agent for change in Olympia. In his view, Gregoire is an insider who is “the governor for the government, not the governor for the people.”

Added Rossi: “The state government we set out to change four years ago is more expensive and less effective at solving our problems

“It’s going to take new leadership in Olympia.”

Rossi has spoken against what he sees as Gregoire’s biggest failures, including tax and budget policy, transportation, foster care, education financing and dealing with criminals. He said he’ll offer effective leadership on all those issues.

“The governor for the government has had her turn. We can do better,” he said.

Gregoire, however,

In the primary election last month, Gregoire finished less than 2 percentage points ahead of Rossi. Both sides have built multimillion-dollar campaign war chests, with even more money raised by third-party surrogates to help their chances.

Expect another close fight to the finish.

Q. The state’s revenue forecast dropped by $530 million, pushing a projected deficit in the next budget to about $3.2 billion. How do you proposed to make up the difference?

GREGOIRE: I have already taken action to cut the projected budget shortfall in half.

Over the last several months, IÕve ordered state agencies to implement a hiring freeze and to eliminate non-emergency, out-of-state travel, equipment purchases and services contracts. IÕve ordered a 1 percent, across-the-board cut at state agencies.

Unlike my Republican opponent, I wonÕt sacrifice our values in tough economic times. When he was faced with a budget shortfall, he slashed healthcare for 40,000 kids, taxed nursing home patients and cut education by $1 billion.

ROSSI: By focusing on the priorities of government and working in a bipartisan fashion to find efficiencies, we will address this deficit without raising taxes.

As Chairman of the Senate Ways and Means committee in 2003, I balanced the largest deficit in state history without raising taxes, while protecting the vulnerable and adding $200 million for education. Every single night, I went through the budget line by line and made thousands of decisions. For instance, we decided not to purchase new state cars and we cut expensive retreats for state employees.

I have also pledged to freeze hiring and restore spending limits to get our state on a fiscally stable path. We must bring spending back in line with revenue.

Q. Will you raise taxes in wake of a weakening state economy?

GREGOIRE: We should not be talking about taxes in tough times. I also do not support an income tax.

ROSSI: No. Families in Washington are hurting because of the economy. Over the last four years, Governor Gregoire has increased spending by $8 billion Ñ thatÕs equal to $4,000 per family in Washington. Now, families are struggling to pay the mortgage and feed their children. We shouldnÕt be asking them for more of what they donÕt have: money.

Despite the tough times, Washington state will still see an increase in revenue next year. We donÕt have a revenue problem, we have a spending problem. As governor, I will reduce spending, but will protect our most vulnerable citizens and increase education funding. Most importantly, I wonÕt raise taxes to do it.

Q. Small business owners have struggled in the state. How do you propose ways to improve that climate?

GREGOIRE: I think the state can help small business owners succeed by making our state a good place for business. Fortune magazine said our state is the fifth-best state for small business, but I think we can do better.

In my first term, I reduced L&I and Unemployment Insurance costs by $465 million and implemented a total of $900 million in tax incentives to help businesses create jobs.

An educated, skilled workforce will attract businesses to our state and keep businesses in our state, because great employees help businesses grow.

ROSSI: Small business is the top creator of jobs in our state, but unfortunately Washington has one of the highest small business failure rates in the nation. As governor, IÕll ease the unnecessary regulations that impede the success of these small businesses, while ensuring they are operating in the best interest of consumers.

My goal is to turn Washington into an entrepreneurial state; to do so, we must eliminate the challenges facing business. Specifically, IÕll increase the B&O tax credit for small businesses and eliminate the Death Tax. Also, IÕll appoint directors to agencies such as Labor and Industries and the Department of Ecology who believe helping people succeed is their job. Unfortunately, the current administration sees small businesses as nuisances.

Q. What are your plans to improve transportation options, relieve congestion and improve environmental conditions, particularly in the Puget Sound area?

GREGOIRE: When I took office in 2005, I inherited a neglected highway system. In 2003 and 2004, there were only 12 projects completed in Washington state.

Under my leadership, 167 transportation projects have been completed and 109 more are on the way. Voters upheld the projects by rejecting an initiative that would have cancelled the investments.

Our environment is the greatest legacy we can leave our children. Washington state is leading the nationÕs fight against global warming. In my first term I signed bills to reduce greenhouse gas emissions in our state and create 25,000 green jobs by 2020. I also created the Puget Sound Partnership to clean up and restore the Sound to good health.

ROSSI: Congestion costs WashingtonÕs economy $624 million a year. My top transportation priority is congestion relief. WeÕll address nine of the stateÕs worst traffic chokepoints, including replacing the 520 bridge with a bridge capable of 8 lanes, widening portions of I-405, and extending Highway 167 to the Port of Tacoma. WeÕll reduce our carbon footprint by encouraging innovative technology through the use of tax breaks on hybrid and electric cars and relieving congestion.

I will not raise taxes to pay for these projects; funding will come from 40% of the sales tax from new and used vehicles. My transportation plan is rooted in freedom; whether bus, light rail, or car people deserve the freedom to choose what works best for them.

Q. What will you do to help improve the quality of patient care?

GREGOIRE: IÕm implementing a healthcare plan that will increase access and reduce costs.

The basics of this plan are to use the most effective medicine and medical technology, expand preventative care and care for the chronically ill, and increase transparency in our healthcare system.

With this plan, weÕve expanded healthcare coverage to 84,000 low-income kids and thousands more adults. We are on track to have all kids covered by 2010. And more than 82,000 people enrolled in our stateÕs new prescription discount drug program, saving them about $23 per prescription filled.

ROSSI: I support improving the quality of patient care for our citizens. To do that, we need a, stable, well-trained workforce.

One way to offer better care will be through technology and innovation. Washington has become a leader in health information technology, which can improve the delivery of health care while reducing costs.

We also need to increase access to quality health care. We must act now to recruit, train and retain our physician workforce.

Finally, I will support programs that help place doctors into our rural communities. These areas consistently face physician shortages, and we must find doctors to serve those smaller communities.

I look forward to working with health care professionals to solve problems as governor.

Q. You differ greatly in regard to the fate of education. What are your some of your concerns and some of your proposals?

GREGOIRE: We must provide all our children a world-class education so they can compete in the global economy.

In my first term, IÕve directed K-12 schools to focus more on math and science standards. I also restored funding for voter-approved initiatives to reduce class sizes to provide more individual attention to students and to increase teacher pay. Thanks to these investments more than 91 percent of students passed the WASL this year.

I brought our state to the forefront of early childhood education because our children need to enter grade school ready to learn. I expanded pre-kindergarten programs to include 2,250 more low-income children. WeÕre phasing in all-day kindergarten for students, starting first with the lowest-income children.

Under my leadership, our colleges and universities have expanded by 18,000 enrollment slots and apprenticeships have doubled.

During my second term, I want to keep strengthening early childhood education, supporting math and science standards, and preparing our students for the global economy.

ROSSI: Math and science scores in Washington are abysmal. In 2006, only one-third of 10th graders passed all part of the WASL, leaving lawmakers to eliminate math and science as graduation requirements.

As governor, I will work to allow school districts to pay qualified math and science teachers more. We will also change the rules on accreditation to allow qualified individuals from the private sector to teach in these areas. This will help address teacher shortages in these high-demand fields and also bring experts into our classrooms.

I will also replace the WASL with AmericaÕs best standardized test and have students meet fair and rigorous standards, including math and science. Our students must be able to compete in the global economy.

Q. And finally, why should we vote for you?

GREGOIRE: Times are tough right now across our entire nation. Our state isnÕt immune to the economic fallout from Wall Street and the other Washington.

In times like these we need a governor who will fight for working families and Main Street. IÕve balanced a $2.2 billion budget, created nearly 250,000 new jobs in a tough economy, and fought the Bush Administration over its irresponsible decision to cut healthcare.

Special interests donÕt need another person to fight for them Ð but working families do. IÕm that candidate in this election, and I hope I have earned your vote.

ROSSI: There is much at stake in this election; we have the opportunity to restore fiscal responsibility to Olympia and start fixing real problems. But we need new leadership. This campaign is not about me, itÕs not about Christine Gregoire: itÕs about changing the culture and direction of state government for a generation.