SALEM, Ore. -- Democratic U.S. Senate candidate Jeff Merkley just had the best fundraising quarter of his campaign, raising more than $1.4 million for what's shaping up to be one of the most competitive Senate races in the country.

Republican incumbent Sen. Gordon Smith raised slightly less than that amount for the quarter, although he has a formidable lead when it comes to the total amount he's raised and money in the bank.

Still, Merkley's latest report makes it clear that Democrats in Oregon and around the country think he has a decent shot at defeating Smith in a year when Republican incumbents coast-to-coast could be facing another dismal election cycle.

Merkley's FEC report showed he's already raised a total of $2.8 million for the campaign -- well above the total of $2.1 million that Democrat Bill Bradbury garnered for his losing bid against Smith in 2002. Merkley spent more than $2 million to defeat Portland consultan

t Steve Novick in Oregon's May 20 Democratic primary, but still had $569,000 in the bank at the end of June.

Smith has raised $9.7 million throughout the campaign, and has nearly $4.5 million cash on hand even though he's been airing TV commercials nonstop since winning the GOP nomination against token opposition.

The Republican incumbent's ads have been aimed at burnishing his credentials as an independent lawmaker who works across party lines, although Democrats have been working hard to portray Smith as a tool of the Bush administration.

Smith campaign spokesman Lindsay Gilbride said that while Merkley matched Smith in fundraising in the most recent quarter, Smith continues to be hold a huge lead in the campaign fundraising.

"Gordon has a 9-to-1 cash advantage over Merkley," she said. "Regardless of what Jeff Merkley raised this quarter, his financial gas tank is still running on empty."

She also said that because Smith has a lot more money than Merkley, the Democratic challenger's campaign is being "illegally towed" by the Democratic Party.

The was a reference to the help that the Democratic Senatorial Campaign Committee has been providing to Merkley. The DSCC recently poured what could be more than $400,000 into disputed "issue ads" recently aired by the Democratic Party of Oregon that featured Merkley.

Merkley appears in two new TV ads talking about his record on crime and veterans issues. The ads are paid for by the Oregon Democratic Party, and Merkley claims they are not intended to help him get elected and thus do not violate federal election laws.

Smith's campaign calls that assertion laughable.

Merkley's campaign spokesman, Matt Canter, noted that the Democratic contender raised $420,000 over the Internet in the most recent quarter, which has become an increasingly important source of money for politicians.

The $1.42 million raised in the second quarter was three times what the campaign got in the first three moths of the year, Canter said.

That shows that Merkley's campaign is "building the critical financial and political support he needs to retire Senator Smith" in the November election, Canter said.