COEUR d'ALENE - Idaho needs to steel itself, Lt. Governor Brad Little says.

The state should start preparing for a drop in federal-funded services, he warned during a visit to Coeur d'Alene on Wednesday, as the national government continues to grapple with severe deficits.

"I am pretty well convinced that we're going to have less help from the federal government in the future," Little said, speaking at The Press office.

The state government is well aware of the areas it relies on the most for federal support, Little added: Transportation, education and Medicaid.

If the U.S. government constricts funding for those services, he said, the Legislature will have to weigh its options.

"We have to decide, what are we going to do?" he said. "Do we do away with the programs? Do we come up with a different source of revenue?"

He has an eye on some possibilities.

The financial pinch could be eased by reforming tax code, he believes, so it's more conducive to economic growth.

But there is some pressure on businesses and workers to focus on boosting production, Little said.

The more products industries churn out, the more revenue is generated.

That applies to all markets, the lieutenant governor added. From the local grocery store to wood production companies to everything in between.

"If you create economic growth, if you create jobs, you need less of things like unemployment, Social Security, Medicaid," Little said. "It makes sense to try to grow the economy."

Idaho is in a better position than most states to become more independent of the federal government, Little said.

The gem state is among 18 states that have passed a budget, he pointed out, thanks to legislators cutting 25 percent of spending.

"We had to make some adjustments, and we have," Little said. "Other states haven't made adjustments."

He is convinced that is why Idaho will be at the forefront of the economic recovery.

"When the (tough) economic times end, it will allow future legislatures and governors to make the right choices, whether to spend more on education or to reduce taxes," Little said. "So many states don't have that flexibility. They have borrowed money or spent money they didn't have to spend."

He suspects that next year will be a time of economic settling out, he said, which will allow for a sustainable budget.

Education might be given an injection of dollars as soon as the next two months, he added, with the state receiving more in tax receipts than expected.

"We conservatively budgeted, which most people wanted us to do," Little said.

The Legislature had voted to spend any extra funds on education, he said.

"NIC (North Idaho College) will be one of the recipients," he said.

Job growth, meanwhile, looks promising in the state, Little said. Especially North Idaho, where he could point to businesses like Ground Force Manufacturing that are expanding.

The low cost of production in Idaho will make it ideal to create products needed around the world, he added, which he suspects will help nurture job creation here.

It will just take a little time to get there, he said.

"If I had to buy stock in a state, I'd buy stock in Idaho," Little said. "Because of the diversity of our economy, the diversity of our state. I like our position."