Gov. Chris Gregoire offered her final biennial budget proposal this morning. In addition to required “current revenues” proposal – one that doesn’t rely on new taxes – she presents a plan to make the billion-dollar downpayment on the increased public school funding required by the state Supreme Court’s McCleary decision.

From the governor’s press release:

… the governor is proposing a wholesale excise tax on gasoline and diesel fuel that would increase gradually over the next three biennia to eventually fund the entire pupil transportation budget. By using transportation taxes to fund pupil transportation, state General Fund dollars will be freed up to cover the other K-12 enhancements. To pay for those enhancements for the next two biennia, the governor is proposing to extend for three and a half years two temporary taxes that the Legislature enacted in 2010 — a business and occupation surcharge on certain services and a beer tax surcharge.

For the 2013–15 budget, the wholesale fuel tax would raise an estimated $367 million and the temporary tax extensions would raise $636 million.

We’ll be looking more closely at the governor’s budget and releasing a policy brief on it before session.

Gregoire has said repeatedly that new taxes will have to be part of the McCleary solution. In his campaign, Gov-elect Inslee rejected tax increases, as did members of the Majority Coalition Caucus in the state Senate. Sen. Andy Hill, slated to chair the budget committee under the coalition’s plan, thanked the governor and said he assumed new taxes were not an option. (Democratic majority leader Ed Murray reminds the MCC that the deal isn’t done yet.)

And yesterday, the Joint Education Finance Task Force split along partisan lines on whether new taxes were necessary. As John Stang reports in Crosscut, Democratic members of the group endorsed a list of options, including extending the “temporary” tax increases and using the transportation fund to pay for pupil transportation.

The cake won’t be baked until spring. Brad Shannon’s story here.

UPDATE: Shannon has budget reactions from Republicans and Gov.-elect Inslee. Cool and noncommital, respectively.

Also, Larry Ehl’s Transportation Issues Daily has additional insights.