HARRISBURG -- Given the current economic forecasts, Gov. Tom Corbett's sophomore-year budget likely will be even more gut-wrenching than this year's roughly $1 billion in loudly contested cuts.

Halfway through the fiscal year, his budget advisers say they're preparing for year-end tax collections to be less than what they anticipated by at least $500 million.

And that's the optimistic outlook.

To prepare for those shortfalls, the Corbett administration announced it will be freezing some agency spending approved in this year's $27.1 billion budget.

Officials declined to specify where those reductions will fall but did say they are expected to be finalized next week.

Budget Secretary Charles Zogby, briefing lawmakers and later reporters Tuesday regarding the commonwealth's fiscal status, described a bleak picture for the upcoming fiscal year and few options.

Pension costs to the state for public employees will grow by $520 million. Mandated welfare costs also will rise, along with interest on what the state has borrowed to pay for capital projects.

That trio of increased costs will overshadow the slight boost to tax collections that the state has seen compared to previous years. Nearly all of those new dollars will have to go toward those bills first, leaving state officials searching for at least $750 million in cuts.

Acknowledging the governor's no-tax-hike pledge, Mr. Zogby said any proposals involving new revenues to mitigate those reductions are not up for discussion.

"While many folks thought that the budget that we just came through was a difficult one -- and it was -- I don't think any of us take any pleasure in what needed to be done to bring that into balance. But in many respects, [next year] is going to be an even more difficult challenge," he said.

"All of the easy things, the low-hanging fruit, as I like to say, has been picked."

He declined to speculate on whether local public schools may see further cuts when Mr. Corbett unveils his budget plan on Feb. 7. The current budget, which did not raise any taxes, contained deep education cuts that were protested prominently last spring.

"No decisions have been made," Mr. Zogby said. "At this point, everything is on the table."

Democrats in the General Assembly were quick to blame the Republican leadership for the state's gloomy economic outlook. They argued that the governor and GOP lawmakers have focused too little on job creation -- and its ability to bolster tax collections -- and too much on painting an ominous economic picture.