HARRISBURG -- Get ready for tough times with the state budget, with this year's deficit potentially reaching $2 billion by June 30, Gov. Ed Rendell said today.

For the first four months of fiscal 2008-09, which began July 1, there has already been a shortfall of $565 million, as tax revenues and state investments have fallen off sharply due to the ongoing recession.

"We're expecting a shortfall of somewhere between $1 billion and $2 billion" by the end of the fiscal year June 30, he told reporters today.

And that will necessitate a second round of budget cuts for state agencies. Mr. Rendell has already told agencies under his control to set aside 4.25 percent of their 2008-09 budget because they probably won't be allowed to spend it. That will save $311 million. He has asked independent agencies, ones he doesn't directly control, to make similar cuts, which could save another $39 million.

"We will do everything we can to do as little harm as possible, but the budget cuts are coming," he warned. "I don't want to hear any whining. The cuts will be painful, People have to get ready. No one will make these cuts with any joy, but I don't want to hear any whining."

He said he'll do everything in his power to avoid "a general, broad-based tax increase" next year as a way to balance the state budget, but with revenues declining so sharply, nothing is off the table.

He wouldn't put a specific percentage or dollar amount on the second round of cuts, but expects to announce them shortly.

Two favorable factors for the budget are a $750 million "rainy day fund" for use in case of emergencies and the recent sale of $200 million in leases for drilling for natural gas in areas of Marcellus shale in the state, but budget cuts will still be needed.

Mr. Rendell said he'll wait until December to say more about the growing deficit. A report will come out at the end of November as to whether the deficit has grown beyond that $565 million mark of Oct. 31.

Mr. Rendell said there is much uncertainty in the economy, with major car companies in trouble, homes being foreclosed upon and banks going out of business, so budgeting is difficult.

The deficit could even surpass the $2 billion mark. Sen. Vincent Fumo, D-Philadelphia, who is retiring Nov. 30 and for many years was Democratic chairman of the Appropriations Committee, several weeks ago said the 2008-09 deficit could be as much as $3 billion.

More details in tomorrow's Pittsburgh Post-Gazette.