HARRISBURG — The highly anticipated budget that Gov. Ed Rendell plans to unveil today could be his most creative — and controversial.

In spite of a gaping budget shortfall and a deepening national recession, the Democrat is expected to advocate an overall spending increase that includes more money for education and state-subsidized health insurance.

Two top Senate officials said they expect Rendell will propose nearly $29 billion in spending for the fiscal year that starts July 1 — 2.5 percent above what was originally approved for this year. The officials spoke on condition of anonymity because they did not want to speak publicly before the governor presents his plan.

To pay for it, Rendell is counting on billions of dollars in federal economic stimulus, as well as money from new sources — such as his plan to legalize video poker machines in bars and private clubs — while cutting other programs.

Opposition to those proposals from legislators and lobbyists is inevitable, especially in a year when the administration is projecting an 8 percent, or $2.3 billion, shortfall through the end of this fiscal year on June 30.

Maintaining the same services and subsidies through 2009-10 would create a two-year total shortfall of more than $5 billion, Rendell and legislators predict.

"It's probably as serious a budget issue as I've faced," said Sen. Robert Tomlinson, R-Bucks, who joined the Legislature in 1991.

Rendell has kept many details of his budget presentation under wraps, but has released some of the information to news organizations and legislators in recent days. He planned to formally present his budget in an address to a joint session of the House and Senate today.

Legislators will have to consider Rendell's new budget plan and major changes to the $28.3 billion current fiscal year budget to account for the swan dive in tax collections.

One major budget cut Rendell will propose is eliminating the 113-year-old Scotland School for Veterans' Children in Franklin County, near Chambersburg.

The center, which is costing $13.5 million to run this year, was a shutdown target of Gov. Robert Casey during the 1991 budget crisis, but legislators insisted it stay open.

The legalization of video poker machines is designed to eventually generate $550 million a year to help pay for thousands of students to attend any of the state's 14 universities and 14 community colleges.

And Rendell hopes to double the number of adults covered by the state's low-cost health insurance program to 90,000 by qualifying for federal matching dollars from the Medicaid program.

While many of Rendell's proposals may sail smoothly through the Democratic-controlled House, he will probably face battles in the Republican-controlled Senate.

His proposals to impose new taxes on the production of natural gas and sales of cigars and chewing tobacco are certain to cause friction.

In addition, Republicans say, Rendell's plan to rely on billions of federal dollars presents a quandary. A state could lose the money if it doesn't use it within a couple years, but using it to fill a budget hole now just means the hole will have to be filled later on, when the extra federal money may no longer be available, they say.