OLYMPIA - As state legislators scramble to find a budget consensus prior to the end of the session Thursday, they do so in the shadow of McCleary versus Washington.

The recent state Supreme Court ruling says the state is failing to meet its duty to fund K-12 education, a decision that is having an impact on budget negotiations.

Legislators continue searching for how they'll close a gap of about $1.5 billion between expected revenues and expenditures over the next 16 months.

House and Senate Democrats must agree on a final spending plan before the 60 day legislative session ends or head into overtime with a special legislative session.

They're still a fair distance from submitting a shared budget for the governor's signature.

Three conservative Democrats joined with Republicans over the weekend to form a working majority and force their budget through by way of a rarely-used parliamentary maneuver. They argued that a budget plan released earlier in the week by Senate Democrats didn't include enough reforms and leaned too heavily on a $330 million delay in payments to school districts until the next biennium to balance the deficit.

The Republican budget does away with the delay and, while it sets aside more money for education overall, it does cut about $74 million in K-12 and higher education funding to avoid the payments shift.

A House proposal unveiled last week was similar to the Senate Democrats' plan, with about $405 million in delayed expenditures supporters said could at least hold the line on further cuts to education.

While the spending plans have significant differences, they each illustrate the extent to which the McCleary case has impacted and will continue to impact state budget conversations going forward.

"This court case had a clear impact on the outcome of this legislative session," said Randy Dorn, Washington's Superintendent of Public Instruction. Dorn and several state legislators spoke during a meeting in Olympia last week with editors and publishers from several Washington newspapers.

"It's basically about our constitution and whether our legislature is meeting its constitutional obligation, and it's clearly not," he said, adding the ruling likely saved levy equalization from the chopping block this year and prevented a move to shorten the school year by five days.

"Local districts have to pay $110 million a year out of their levy dollars to pay the state responsibility," Dorn said. "If the state was paying its state responsibility, that would free up $110 million a year for districts to spend on things they deem important."

Dorn said several education reforms are in the works to help offset the fiscal impact of McCleary. These include changes to teacher evaluations, modified teacher health care plans and teacher bonus reductions.

But the court case could eventually necessitate another look at new state revenues, according to Sen. Lisa Brown, D-Spokane.

"As we make reforms that bend the cost curve, at some point we will also have to make changes on the revenues side as well, given the McCleary decision and the commitment we've made to fund basic education without a clear path of how we're going to get there," she said.

Sen. Joe Zarelli, R-Ridgefield, meanwhile suggested a couple of tax alternatives that could help fund basic education, including a "cigar lounge" bill that could bring in $4.5 million and a move to allow off-reservation recreational gaming he estimates could generate as much as $400 million a biennium.

"That buys back a lot of whatever you want to buy back, but we can't get any traction on it," he said.

Rep. Ross Hunter, D-Medina, said regardless of whether it's on the revenues or reforms side something must be done, and soon.

McCleary calls for $1.5 billion a year in current dollar increases between now and 2018, which along with inflation and six years of pent up demand for salary increases, could mean a cost of up to $6 billion each biennium, according to Hunter.

"The state budget doesn't have the room to do that no matter what cuts we make to health care," he said, adding the state has to find a way to adequately and continually fund basic education by the end of 2013.

"Next year will be very tumultuous because we have to make these changes to resolve McCleary," he predicted.