HARRISBURG — Pennsylvania's budget situation worsened in March, as lagging tax collections prompted a senior Republican lawmaker to warn Wednesday that the state could be staring at a $1 billion deficit soon.

However, the administration of Democratic Gov. Ed Rendell responded that it is too early to predict such a shortfall, and that the state is in a position to avoid further spending cuts before the June 30 end of the fiscal year.

The Rendell administration also insisted that its projection of 3.2 percent growth in next fiscal year's tax receipts is sound, despite this year's lackluster revenues.

The volley came on the last day of a disappointing March, one of the two biggest tax collection months for the state government. The results were expected to be more than $200 million short for the month as the recession continues to take a toll on Pennsylvania and other state governments.

As a result, the state is facing a $700 million-plus shortfall to date — about 2.5 percent — after budget negotiators reached a deal in October to wipe out a two-year, $6 billion-plus budget deficit by cutting programs, raising some business tax rates, drawing down reserves and plugging holes with federal budget aid.

"I think it's very reasonable to estimate that the deficit could push a billion by the end of the year," said Senate Appropriations Committee Chairman Jake Corman, R-Centre.

The deepening deficit tears a hole in the $29 billion, no-tax-increase budget proposed by Rendell and passed last week by the Democratic-led House, Corman said. The Republican-controlled Senate has not yet taken up the budget bill.

Corman suggested that groups that depend on the state government for money — counties, municipalities, school districts, private-sector human services providers and others — should not look to that document for what to expect in the 2010-11 fiscal year that begins July 1.

The growing gap also behooves the governor to look at ways to cut spending in this fiscal year and calls into question whether the state should expect revenue to increase next year, he said.

"Maybe 3.2 (percent) is higher than what we can reasonably expect," Corman said.

Rendell's top budget adviser, Mary Soderberg, said the administration can still balance the budget without any cutbacks under the current circumstances.

"If it doesn't deteriorate any further, and we have a shortfall of approximately $750 million, we can manage within that," Soderberg said Wednesday.

In recent months, Rendell has frozen some spending and made other arrangements to plan for a $525 million shortfall this year. Tax refunds are lower than expected and Pennsylvania is getting the benefit of keeping $275 million that it had expected to owe to the federal government as part of a prescription drug coverage agreement, she said.

Soderberg also defended Rendell's rosier revenue projection next year, saying the state's economic adviser, Global Insight, has routinely boosted its economic output projection.

In any case, there is reason to expect improvement in April, she said. March's collections were unusually depressed because February snowstorms hurt retail sales and electric utilities submitted lower than-expected annual gross receipts collections.