Initiative 1183 was supposed to raise money for public safety, but state lawmakers shifted that money around in order to reach a budget agreement. Mayors of several large cities argued $10 million a year was being lost, and urged the governor to veto that section.
But Gregoire said no, and signed the state budget.
"If I were to do what they've asked me to do, which is veto a particular section of the bill, I would blow a hole in my ending fund reserve of $29 million," she said. "I can't do that."
But she believes the intent of the initiative is still being upheld even without that money.
"Everything in that initiative is being carried out," she said.
But the governor says the cities and counties who wanted the veto have to share in the pain of cuts during a recession. She says overall, the $31 billion budget is a good one.
"This supplemental budget is lean, but it is not mean," she said. "And for that I am very grateful."
Budget writers said they did it without hurting vital services.
"We were able to hold on to our education funding and not make any cuts at all to education which I actually am viewing as a miracle," said Rep. Ross Hunter.
Gregoire warned that the next budget is going to be tough, too. She says the only way around this is more money from people like you, but stopped short of using the word "tax."
She may have a proposal in December, but said it's really going to be up the next governor to figure this all out.
Gregoire also signed reform measures calling for a four-year balanced budget, and a reduction is future pension payments for new state employees.