1. You can watch the Republican-dominated Majority Coalition Caucus' response to yesterday's revenue forecast here. There are certainly some noteworthy moments ... like when MCC leader Sen. Rodney Tom (D-48, Medina) pretty much says the MCC philosophy is a race-to-the-bottom approach when it comes to pleasing business. "We have to do everything we can in Washington state to win," he says, stressing that the MCC would still like to pass a "vital" business-friendly workers comp bill or else jeopardize losing Boeing jobs to South Carolina.

Or when they turned the Democratic sound bite about hostage taking on its head (the Democrats had been accusing the Republicans of holding budget negotiations hostage for partisan Republican policy bills). Tom asked, cleverly, if the Democrats were really going to risk shutting the government down over raising taxes. (The Democrats actually want to close corporate tax loopholes.)

2. But the bottom line is this: The MCC said that with the new revenue ($480 million if you include money from the Democratic legislation passed last week to close the estate tax loophole), the senate was no longer linking their policy bills (like the workers' comp bill) to a budget deal. And they were expecting the Democrats in the house to do the same and take their demands for $160 million in new revenue from closing the out-of-state sales tax and closing a telecom industry loophole off the table as well.

The house Democrats do not seem ready to do that, though. While the Democrats acknowledge that—as the Republicans said yesterday—closing the $109 million telecom loophole is not technically part of the current budget cycle, the Democrats believe that without closing the loophole the state will be vulnerable to budget-busting lawsuits from the likes of Comcast (which doesn't get the exemption, while traditional land line carriers do) next year.

Democrats say it's irresponsible governance to let the loophole stand.

The Democrats also like to point out that their telecom legislation—which passed the house 74-18—has a provision that's good for Republican turf in Eastern Washington because it provides money for rural telcoms (to connect isolated homes) that the federal government is taking away.

3. Another sticking point? The capital budget.

The Republicans still want a $7 billion water works project in Yakima, but are simultaneously yanking $9 million for school construction in Seattle.

Watch for fireworks, particularly from the Seattle delegation, on that.

4. As for the Democrats' demand for $255 million from closing another batch of corporate tax breaks, such as a $41 million giveaway to big oil, Sen. Tom said "those have never been part of the discussion."

5. There's also the matter of the $8.4 billion transportation budget. And this one plays into the mayor's race. If it doesn't happen, or if it happens without a local option for King County transit, watch for Mayor Mike McGinn to go on the attack against state Sen. Ed Murray.

6. And finally, another (smaller) budget item that has implications for Murray and the mayor's race: His legislation to end the "opportunity to dance" tax, which threatens small clubs in Seattle.

That legislation has run into resistance from Seattle's own Rep. Reuven Carlyle, the house finance chair, who's all about closing tax breaks, not creating them. (Creating the loophole would cost the state about $800,000 this biennium and $1 million in the next biennium.)

Fizz hears from club industry folks that a compromise is in the works.

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