JASPER, Ind. (AP) — Indiana's candidates for governor agreed the state needs to do more for education, but they disagreed strongly on how to pay for it during the second of three scheduled debates before the Nov. 4 election.

Republican Governor Mitch Daniels and Democratic challenger Jill Long Thompson differed sharply on whether leasing the state lottery was a viable option to pay for expanding higher education opportunities for Hoosiers.

Libertarian Andrew Horning also took part in the hourlong event at the Jasper Arts Center in Jasper, about 100 miles southwest of Indianapolis.

Long Thompson also took a verbal jab at Daniels, accusing him of using state aircraft to travel to political events. Daniels defended the travel as legitimate state business.

"I take it personally," he said of the criticism after the debate.

Unlike the first debate in Merrillville last week, where a moderator asked the questions, this time people in the audience of about 600 posed some of the questions.

Felicia Bally-White of Westfield asked the candidates what they would do to increase funding for public education.

Daniels said the state had increased funding for education during his administration, and would continue to do so if he is re-elected. He said no state digs deeper to fund public schools, but more must be done to steer more dollars to the classroom instead of buildings and overhead.

Long Thompson said the one thing she would not do is privatize the state lottery to help fund education.

Daniels has said leasing the state lottery is one option to pay for a proposed program that would provide college scholarships to students whose families earn less than $60,000. Students could get two years of free tuition at Ivy Tech Community College, or up to $6,000 during their first two years at another Indiana public or private school.

Daniels' campaign says the $50 million program would give parents more security because the program would be based on a predictable income source.

Long Thompson wants to expand the existing 21st Century Scholars Program, which provides financial aid to lower-income students who meet certain grade requirements. Long Thompson wants to make the scholarships available to families making up to 250 percent of the federal poverty level — about $53,000 for a family of four. Currently the scholarships are available to students from families earning 185 percent of the poverty level, or $39,220 for a family of four.

Daniels has raised and outspent Long Thompson by millions, and has been running television ads non-stop since before the May primary even though he did not have an opponent. Long Thompson was on the air about six weeks before her narrow primary victory over Indianapolis architect Jim Schellinger.

She stopped running ads after the primary, eventually went back on the air for awhile during the summer, but stopped again after Labor Day. She said it was part of her strategy all along and she plans to run more ads soon, but political observers saw it as a sign she is short on money during a critical time in the campaign.

Yet a statewide Indianapolis Star-WTHR poll of 600 likely voters released last week found 46 percent supporting Daniels and 42 percent favoring Long Thompson. That matched the poll's margin of error of plus or minus four percentage points.

Although there were no direct questions about jobs and the economy, Long Thompson brought it up several times. She said the state has lost tens of thousands of jobs over the past year, and more were announced this week.

"He only looks at one side of the ledger," Long Thompson said of Daniels. "He looks at jobs that were created, but doesn't look at how those are offset by the jobs that are lost."

Daniels has not denied the national economy has had some impact on Indiana's, but said the state has won national accolades for creating a competitive business climate in the past few years.

Long Thompson criticized Daniels for privatization efforts, saying they were not leading to efficiencies and cost savings. Daniels has said that although there have been some glitches in some of the efforts, including privatizing some welfare enrollment, they are improvements over previous programs.

Thompson criticized Daniels' use of state airplanes and a helicopter for traveling to what she has called campaign events.

A recent story by The Journal Gazette of Fort Wayne said Daniels had logged about 85 percent as many flights in state aircraft in the first seven months of this election year as he did all last year.

Many of the flights were related to duties of office, but the newspaper said the mix of flights included some trips that seemed political, including appearances at local parades and festivals and at least five speeches at Republican events.

Daniels said every one of his trips had official business attached to it in some manner.

"What this really has helped me think about is I'm a pretty cheap date for Indiana," he said. "I stay in people's homes. ... Maybe one day we'll be able to have an election, I suppose in this state, where personal attacks don't come into it, but maybe this one is not going to be the one."

Long Thompson said it was simply wrong for a governor to use state aircraft for political events. She has called on the state inspector general to investigate Daniels' taxpayer-paid air travels.

Horning mentioned several times that the two major parties were entrenched in power, and it was time for a fresh change.

The third and final scheduled debate is set for Oct. 14 on Indiana University's Bloomington campus.