HARRISBURG -- With state lottery sales declining over the last three years and year-end Lottery Fund surpluses dropping, maybe Gus, the second-most-famous groundhog in Pennsylvania, will have to develop a new grin, new instant lottery games or new sales ploys.

State Rep. Mario Civera of Delaware County, Republican chairman of the Appropriations Committee, said yesterday he's concerned about the drop in lottery ticket sales and declining surpluses from fiscal year 2005-06 to the end of fiscal year 2007-08, which is June 30.

Lottery ticket net collections fell from $1.41 billion in fiscal 2005-06, which ended June 30, 2006, to $1.35 billion in fiscal 2006-07, and are forecast to fall again to just under $1.3 billion this fiscal year. Officials are hoping for a slight increase, to just over $1.3 billion, in fiscal 2008-09.

Mr. Civera also was concerned that the Lottery Fund's balance, $476 million in June 2007, is projected to fall to $301 million by June 30 and $35 million by June 30, 2009.

"That's a staggering 88 percent drop in funds,'' he said. "I think there could be a real problem here. The Lottery Fund is far too important to Pennsylvania seniors for us to ignore.''

Mr. Civera wondered if the opening of slots casinos over the past 18 months is causing a drop in lottery sales.

Revenue Secretary Tom Wolf disputed that idea, saying the slowing economy, rise in gasoline prices and lack of big Powerball jackpots -- $200 million and higher -- in recent months have combined to hurt lottery sales.

He said it's too soon to say for sure what, if any, effect casinos are having on lottery ticket sales. "Let me be clear -- we have no reason to believe slots are negatively affecting sales. However, it may still be too soon to tell."

Republicans said only seven casinos are open so far -- six at racetracks -- and when all 14 are open in two or three years, lottery sales could drop more.

Because lottery proceeds pay for senior citizen programs, like bus and van transportation, senior citizen centers, drugs through the PACE and PACENET programs and property tax and rent rebates for seniors, a decline in ticket sales always gets attention from state legislators.

Mr. Wolf insisted that services for senior citizens will continue and said elderly citizens should not worry.

He said the Pennsylvania Lottery ranks seventh among the nation's 43 lotteries in annual sales and fourth in annual profits. "Our lottery is one of the most efficient in the country,'' he told the appropriations committee.

Two years ago, Mr. Wolf said, lottery sales were especially brisk because of several huge jackpots in the Powerball game, which spurred sales.

At one point he expected lottery sales would grow by 2.8 percent in fiscal 2007-08. But sales "have been comparatively below last year, requiring the Lottery to revise downward its original sales estimate,'' he said.

Why the bad news? The national economy has slowed, with especially poor sales generally in December and January, he said. "The Lottery, like any other retailer, is not immune to an economic downturn,'' he said.

Also, the Lottery has not been boosted by large Powerball jackpots -- those in the range of $200 million to $300 million. Sales rise when there's a big jackpot, but there haven't been many of those in recent months, Mr. Wolf said.

The Lottery has increased the number of stores and outlets where tickets are sold from 7,000 in 2003, when Gov. Ed Rendell took office, to 8,500 now, but it's getting harder to add new outlets.

On another issue, Mr. Wolf said he supports Mr. Rendell's call for a $130 million, one-time tax rebate program to stimulate the economy. Lower-income families would get a rebate of $400 (for two-parent families) or $200 (for single-parent families). The money would come from the state's healthy Rainy Day Fund of $750 million.

Mr. Rendell is meeting resistance from some Republicans, who prefer a permanent reduction in the personal income tax rate, from the current 3.07 percent to 2.99 percent, for all taxpayers.

Mr. Civera said he doesn't see why both initiatives couldn't be done to spur the economy.