Gov. Butch Otter’s monthly “Capitol for a Day” roadshow has long been his touchstone. After his seventh State of the State message Monday, an almost buoyant Otter said he drew on what he hears on the hustings.

“My optimism really comes from what I see out there,” Otter told reporters. “I think that’s what people want to hear: ‘OK, we’ve been listening to what we can’t do. Let’s talk about what we can do.’ ”

From 2008 to 2010, Otter said, “there was a lot of gloom and doom.” Now, “I see a tremendous optimism in business.”

After four years of wrestling with a downturn that cut state spending by about a fifth, Otter isn’t shouting “Happy Days are Here Again.” There is no pay raise in his budget for state employees or teachers, just a 2 percent boost for public schools and a 3.1 percent overall general fund increase.

But Otter’s 2013 agenda is sprinkled with ideas large and small. We heard a far more robust case for a state-run health insurance exchange than Otter offered a year ago. “The fact remains that for now and for the foreseeable future, it is the law,” he said of Obama’s Affordable Care Act.

Otter revived a 2008 idea to borrow $70 million to build a secure mental health facility at the prison complex south of Boise, saying the state can get almost twice the facility — nearly 600 beds — today because of cheaper construction costs.

His small-bore ideas include expanding the 2011 Hire One Act. In addition to a 4 percent income tax credit for each new employee, Otter suggests $1,000 more for hiring workers who are veterans.

He proposed adding five seats for Idaho medical students at the University of Washington; money for four new volunteer fire-protection associations; and urged lawmakers to sign off on the first update to the State Water Plan since 1996.

Monday’s big surprise was Otter’s endorsement of voter-approved local-option taxation for local governments.

“I want to put the responsibility to spend and the authority to collect in the same hands,” Otter said after the speech.

Local option has been the holy grail for local officials for more than 30 years, but state lawmakers have firmly resisted. Only resort cities and auditorium districts can levy local sales taxes.

Otter said the taxing option could help fill the gap from repeal of the $141 million personal property tax on business equipment, which supports cities, counties, schools and other taxing districts. He said that the momentum for that change is strong and that coupling the two proposals could do the trick.

“I’ve never seen near the intensity on relieving the personal property tax that I see now,” Otter said.

The idea was floated last month by Assistant House Minority Leader Grant Burgoyne, D-Boise, at the Associated Taxpayers of Idaho meeting.

“I was gratified,” Burgoyne said. “Hopefully, this will be the opportunity to have the most serious discussion we’ve been able to have in a number of sessions.”

Republican leaders were more cautious.

“What if the voters don’t approve it?” said House Majority Leader Mike Moyle, R-Star. “We’ll see what his proposal is and go from there. He’ll fill us in on the details later, I presume.”

Senate President Pro Tem Brent Hill said he had about six weeks’ warning that Otter was chewing on the idea. “The cities and counties have brought it up and it may be one of those compromises we look at. But it’s not going to make all the counties or taxing districts happy,” he said.

Senate Finance Chairman Dean Cameron, R-Rupert, said rural lawmakers are concerned that the benefits would flow to cities with healthy retail sectors. “But I’m not saying, ‘Hell no.’ I’ll listen,” he said.

Otter also wants to delay until 2014 two fights that could have sidetracked the session, saying study and consensus are necessary before lawmakers take on major education reform and expansion of Medicaid.

He closed his 41-minute speech with an ad lib he said was inspired by former Rep. Ray Infanger, R-Salmon, one of the great stemwinders I’ve ever covered.

“Let us begin first by working on those things on which we agree,” Otter said, “so when we come to those things where we differ, we have a better understanding of each other and a better understanding of our way forward.”

Dan Popkey: 377-6438, Twitter: @IDS_politics