Governor Gregoire says a $435 million windfall from the feds — in the form of more money for Medicaid — will help reduce the size of a proposed revenue package.

Gregoire, in a news conference called to report on the billions the state has received in federal recovery money, said she is confident that Congress will approve a healthy chunk of money requested by the White House to bail out the states’ medical assistance program. President Obama has asked for $25 billion nationwide in Medicaid matching funds.

The state Legislature and governor are grappling with a projected $2.6 billion deficit — a number that could grow after new caseload forecasts are factored in.  Gregoire has suggested cuts and fund shifts, plus about $780 million in new revenue.  She told reporters that the new federal dollars could help reduce the size of the tax package.  Lawmakers also are considering tax loophole closures, state employee furloughs and other strategies.