COEUR d'ALENE - The next legislative session is going to be a lean one.

Even leaner, says Gov. Butch Otter, than last year's.

"I believe this is going to be one of the toughest sessions we've ever seen," the recently re-elected governor announced Monday night at the Governor's Banquet, part of the 2010 legislative tour put on by the North Idaho Chamber of Commerce. "We've got some back filling to do. And the big question is how we're going to do it."

Addressing the hundreds of legislators and other political stakeholders who had been touring North Idaho the past few days, Otter touched on how the state Legislature has dried up its reserve funds.

The options to turn to are few, he said.

"We either lean out the government some more, or we raise taxes," he said, speaking at the Best Western Coeur d'Alene Inn and Conference Center. "I for one am for the former, and not the latter."

The Legislature also faces other responsibilities, Otter said, like being constitutionally responsible. Rousing cheers from the audience, he added that the state also bears the responsibility for pushing back the federal government.

"That's my interpretation. Obviously you're welcome to your own," he said.

He urged elected officials to remember the everyday people they represent, who are facing hard financial decisions of their own.

"I've heard from a lot of folks who understood we had to cut back, that they've had to cut back, too. That they've had to lay off people," Otter said. "Idaho, we have the opportunity to offer them some certainty that in this state, you're going to be secure."

Some members of the audience, which was also treated to a late-night dinner and musical entertainment, were more optimistic about the speech than others.

"I thought he (Otter) was upbeat, and he didn't pull any punches about what the Legislature will have to face," said Sen. John Goedde, R-Coeur d'Alene.

He agreed the overarching theme of the next session will be scrounging up funds to compensate for the rainy day dollars legislators used last year to balance the budget, he said.

"The only way to do it is to grow the economy and grow jobs," Goedde said. "You have to have a sustainable tax system and workforce that has training and skills and ethics to accept that work."

Rep. Frank Henderson, R-Post Falls, said the grim budget outlook is hardly a surprise.

"We need to dedicate our sights to jobs and helping the private sector," Henderson said.

The key is nurturing small businesses, he said, which he believes are the foundation of North Idaho's economy.

"We need to help identify markets for their products and services," Henderson said. "For some, that's in the military, for some it's in areas they've not had the sales force to access before."

Brian Ness, director of the Idaho Transportation Department, predicts his agency won't be asking for much on next legislative agenda.

"We're still running on funds equivalent to the year 2000," Ness said. "We've been looking at funds going down year after year. We're used to dwindling revenues, but we've always managed to work within them."

John Martin with North Idaho College said he is naturally worried how the reduced state funding will impact the school.

"We've seen the shift of state support moving downward over the years, but we've managed to keep up with it with increased enrollment," Martin said. "As long as students are coming, we'll find a way to make room for them."

He added that he thinks the school's chances in the legislative arena are better after being included in the 2010 legislative tour, which ferried state legislators around North Idaho to acquaint them with regional issues and industry.

"We had them out to NIC yesterday and had the chance to talk with them," Martin said. "It gives us a broader approach to the Legislature when we tell them about our issues and concerns."

It also helps the southern Idaho legislators understand the region better, said Stephen Hartgen, state representative from district 23B, encompassing Twin Falls and Owyhee Counties.

"I'm really pleased to see from Boundary County to the northwest region of the state, people are working really hard on economic development. You can see the success in the chambers, the colleges, the business community," Hartgen said. "What I hear is, 'Yes we have these issues, but we will deal with them with clear eyes and a sharp pencil.' I hear the tone of confidence in all of us."