HARRISBURG -- The first day of the state's new fiscal year came and went yesterday with no progress toward a 2009-10 state budget.

The Department of Revenue confirmed what state officials have been expecting -- that the 2008-09 fiscal year ended Tuesday with a deficit of more than $3.2 billion, as the recession sapped revenues from the state's income, sales and corporate taxes.

Revenues for 2008-09 totaled $25.5 billion -- $3.25 billion, or 11.3 percent, below estimate, said Revenue Secretary Stephen Stetler.

"This is a tough year," Sen. Jake Corman, R-Centre, told his colleagues on the Senate floor yesterday. "Our revenues took a significant dip this year. But we can't tax our way out of this problem. We shouldn't raise taxes on Pennsylvania entrepreneurs, families and the middle class. We can't just make short-term decisions. We have to look at the long term."

To erase the deficit, Democratic Gov. Ed Rendell has proposed combining $1.1 billion in additional federal Medical Assistance funds with more than $500 million saved through hiring freezes, travel bans and other departmental cutbacks. Then he would use some or all of the state's $750 million Rainy Day Fund, part of a $700 million surplus in an account for medical malpractice premiums, $174 million generated by leasing land for natural gas extraction, and money left over from previous budgets.

He also wants to fund the 2009-10 budget by increasing the personal income tax rate to 3.57 percent, from the current 3.07 percent, along with increasing the cigarette tax, taxing cigars and smokeless tobacco, and enacting a new tax on natural gas.

Republicans object to the new taxes and the use of the Rainy Day Fund. In the House, they began lining up to try to stop the tax increases. Mr. Rendell contends the 2009-10 budget can't be balanced just by severe reductions in spending, but Republicans claim it can be.

About 40 GOP lawmakers, joined by officials of the conservative Commonwealth Foundation, gathered in the Capitol rotunda to unveil an 8-foot sign containing the names of all 253 legislators. Republicans began checking off their own names on the sign, using it as a petition to indicate they oppose tax increases.

House GOP Leader Sam Smith of Punxsutawney predicted the vast majority, if not all, of the 99 House Republicans would sign the anti-tax petition, and hoped some Democratic legislators would join them.

Mr. Smith said he wants House Democratic leaders to bring one of two budget bills to the House floor for a vote -- either Senate Bill 850, a $27.3 billion budget proposal that the GOP-controlled Senate approved in early May or House Bill 1416, a $28.8 billion proposal from the governor.

Once a budget bill is introduced, Mr. Smith said he would try to amend it with a bottom-line spending plan that's close to Senate Bill 850 and doesn't contain tax increases.

Rendell spokesman Chuck Ardo contended that because Senate Bill 850 is not balanced, it is constitutionally invalid. Since the Senate approved it nearly two months ago, state revenues have continued to fall, leaving it $1.5 billion "out of whack," said Sen. Jay Costa, D-Forest Hills.

"If the Republicans believe we can pass a budget without a tax increase, let them produce a balanced budget for us to review," Mr. Ardo said.