HARRISBURG Pennsylvania's budget forecast appears far from merry and bright.

At a briefing Wednesday, Budget Secretary Charles Zogby said the state could be facing at least a $1.2 billion budget gap for the next fiscal year.

He said rapidly rising pension costs for state and public school employees, coupled with increased costs for health care to the poor, would put the state in the red for the fiscal year that begins July 1.

How the administration would plug the shortfall is unclear.

Despite the gloomy forecast, Zogby signaled that there was little appetite for the deep spending cuts for public schools and social services that became the hallmark of Gov. Corbett's first year.

Those cuts were so unpopular that the Republican governor, who ran on a no-tax pledge, has been facing some of the lowest approval ratings in Pennsylvania history as he gears up for a reelection battle next year.

Zogby said Corbett "would very much like" to increase funding for public schools when he unveils the details of his budget proposal in early February.

"I think we've reached the threshold for pain for cuts," said Zogby. "I think - and the governor is at the top of the list - [we have] been exhausted by cuts. We are trying for a budget that makes the kinds of investments the governor wants to see, and looking at ways to generate revenue . . . without going to back to Pennsylvania taxpayers and asking them to take more out of their family budgets to send to Harrisburg."

Asked how the administration planned on bridging the $1.2 billion to $1.4 billion budget gap, Zogby said: "I am not going to dismiss anything out of hand. At the end of the day, it's the governor's budget, and he makes the decisions."

Corbett has made no secret about wanting to rein in the skyrocketing cost of public pensions. Administration officials have been eyeing a plan to postpone some of the state's immediate pension-fund payments - expected to increase $610 million in the next fiscal year - as well as change pension benefits for future public employees.

There have also been discussions in the legislature about whether to legalize and tax online casino gambling, and whether to introduce as a lottery game keno, which could generate several hundred million dollars. Some legislators say they have heard rumblings of reviving the stalled effort to privatize the state's liquor stores as a way to generate revenue.

For their part, Democrats have lambasted the administration for sticking to what they described as an uninspired and ultimately constricting script for balancing the budget. They have advocated postponing a planned tax cut for businesses, scaling back a long-standing tax break for retailers, and slapping new taxes on cigars and smokeless tobacco, among other measures.

"The administration has advanced a series of policies that have failed the commonwealth of Pennsylvania," said Sen. Vincent Hughes of Philadelphia, the ranking Democrat on the Appropriations Committee. "We've got to go in a different direction."

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