Gov. Jim Doyle kept his focus on the economy in his State of the State address last week, for which he should be applauded.

Mr. Doyle proposed extending tax credits to companies that invest sufficient amounts in research and development. He suggested allowing individuals to exclude a portion of their capital gains from taxation if they are willing to reinvest their earnings in new Wisconsin businesses. He also talked about the need to continue to attract venture capital to Wisconsin ? and about the need to invest in the state?s manufacturing sector.

The governor announced a proposal to allow small businesses to pool their purchasing power to obtain health care for employees. And he reiterated his excitement for the Wisconsin Institutes for Discovery ? the soon-to-be-constructed campus building that is likely to be a boon to the state?s biotech sector.

These initiatives share a common theme in that they all stand to benefit the state?s economy in the long run. While it is certainly tempting in times of economic instability to focus on the immediate future, Mr. Doyle deserves credit for keeping his eye on the bigger picture in his address.

It is true, however, that the state faces a serious budget problem in the year ahead. Preliminary projections from the Legislative Financial Bureau show the current biennial budget operating at a deficit in the neighborhood of $300-400 million through mid-2009. The shortfall stems from lower-than-projected tax collections attributed largely to a sagging national economy.

With both Mr. Doyle and legislative Republicans on record as opposing any tax increases to cover the shortfall, spending cuts seem inevitable. Though he acknowledged ?challenging days are ahead,? the governor has not pinpointed specific areas for spending reductions, other than to tell the heads of the state?s administrative departments to enact modest cost-cutting measures.

We are hopeful the governor will provide more details as revenue figures become clearer in the month ahead. In the meantime, though, we are encouraged by the overall tone of Mr. Doyle?s State of the State address. Most of his economic proposals are sensible. Perhaps most importantly, many are of the type that figure to be amenable to Republicans in the Legislature.

After the partisan gridlock of 2007, there might be hope that 2008 does not offer a repeat.