Governor Gregoire, in her annual State of the State Address to a joint session of the Legislature, says the “incredibly challenging” task of closing a multibillion-dollar budget gap can’t be done without finding $750 million in new revenue once budget cuts are made.

That could come from new federal matching money or new state taxes, or both, she said.

Gregoire said she has identified $1 billion in spending cuts, but that she personally isn’t willing to go any deeper. The governor, cheered by her fellow Democrats, gave a ringing defense of spending for preschool, K-12 and college financial aid, and health care.  She said the state must not “write off a generation of kids.”  She called for “a responsible and balanced approach” to the budget crisis.

“Now is the time to be decisive and it is the time for compassion,” Gregoire said in her 40-minute address.

Gregoire called for tax breaks for new job creation by small businesses, greater emphasis on “green” jobs, permit streamlining and other steps aimed at generating up to 40,000 new jobs.

“Jobs are the way out of this recession,” she said.

The governor gave more specifics at an appearance later in the day before the Senate budget panel.  She said the state should know by the State of the Union Address in a few weeks how much help the federal government can provide. She said it could be $1 billion, including money for Medicaid, education and the Basic Health Program.

Gregoire said she wants to restore $779 million of the cuts she outlined in December in a no-new-taxes budget. This would include health care, some social and health programs and levy equalization for children.  She said heavy cuts still are unavoidable, including human services, higher education, general government, class-size reduction and more.

She gave no specifics about her revenue proposals, except for closing some tax loopholes, taxation of out-of-state businesses and repairing a big hole in the tax code that a Supreme Court ruling punched.

Minority Republicans later said the Legislature should avoid boosting taxes and should slim down government and find ways to wring more savings out of the current budget.

The current 60-day session must end by March 11.