BLOOMINGTON, Ind. | Democrat Jill Long Thompson broke the conversational tone of the third and final gubernatorial debate Tuesday night, accusing Republican Gov. Mitch Daniels of rolling the dice with $1 billion in proceeds from the lease of the Indiana Toll Road.

After asking the candidates to name their biggest defeat, greatest influence, personal philosophy and position on arts funding, moderator Tom Cochrun, a former broadcast journalist, sought some straight talk on taxes and spending. Long Thompson used the opportunity to blast the first-term governor's record.

"Not only has he privatized, but in the Toll Road, for example, he has invested almost one-third of the money that came in from that contract on junk bond and Freddie Mac and Fannie Mae."

Daniels said the state's investment of the $3.8 billion in lease proceeds -- managed by Republican state Treasurer Richard Mourdock -- has been "rock solid."

"I thought eventually we might see a kinder, gentler you, but evidently it's not in (the) cards," Daniels said, turning to Long Thompson, who repeatedly has attacked the better funded incumbent on the economy and privatization.

Mourdock in March said his office earned $287 million last year -- at return rates of more than 6 percent -- on the lease proceeds, which are earmarked for road construction.

"The irony of this must not be lost on you," Daniels told reporters after the one-hour debate, which drew a crowd of 1,018 to the Indiana University Auditorium in Bloomington. "If people like my opponent had their way there wouldn't be any (lease) money to invest."

A Long Thompson spokesman said the state has invested about $300 million in low-rated bonds and $700 million in mortgage-backed securities offered by Fannie and Freddie. The two quasi-governmental lending institutions have become lighting rods for criticism in the national mortgage meltdown that led to a $700 billion federal Wall Street bailout.

Long Thompson plans a Statehouse news conference today to draw further attention to the investment issue, while Daniels said Mourdock intends to set the record straight.

Asked about the role of government, all three gubernatorial hopefuls said smaller is better, with Libertarian Andy Horning stressing the need for strong national defense. "What government is supposed to be is like a junkyard dog -- and you keep it in the junkyard," he said.

Daniels stressed his financial stewardship, pointing to the more than $1 billion rainy day fund Indiana has amassed while "two-thirds" of states are facing deficits and spending cuts. Long Thompson continued to blame the governor for the slumping economy, while Daniels again noted that Indiana's 6.4 percent unemployment rate is better than surrounding states.