Gov. Chris Gregoire seems to be softening her opposition to raising taxes as way to help deal with another looming budget shortfall.

Her budget writers are projecting a shortfall next year of around $1 billion and the governor says there's no fat left to cut.

"My number one concern right now ... is how do we do the cuts? How do we get there?" she told reporters at a news conference this morning. "There are no good options because the cuts are either social services, corrections, health care or education."

The governor said she's told legislative leaders to make their case for taxes, including the possibility of sending voters a proposal.

"I didn't want revenue last year because I couldn't figure out how you could do a revenue package that wouldn't hurt the economy. I'm still stuck in that rut but I've told leadership to come make your case," Gregoire said.

"I've told them come on in and convince me that's the right thing to do and that people will support it. At some point the people, I assume, don't want us to take any more cuts. I'm already hearing about 'why did you cut education?' Well there aren't any options."

Her tone this morning was different from last week when she addressed business leaders at the Association of Washington Business policy summit. At the time Gregoire wouldn't rule out a tax increase but told the gathering, "Tell me a tax that you're going to increase that will give you $1 billion that doesn't hurt business, hurt individuals, hurt our recovery."

Gregoire today also reiterated the case she's making to Boeing to keep its second 787 production line in Washington state instead of building it in South Carolina.

She argued that Washington is the best place for the second line, but noted "I also need to put it in perspective. Which is to say that if we don't get the second 787... we're still the home to Boeing."

"I will just be logical about this," she said. "We are the home of 80,000 aerospace workers. An infrastructure that is second to none in the country. We have higher education ... geared solely to aerospace. You can't put that up over night."