HARRISBURG — With just 10 days until the new fiscal year begins, the state Legislature is back in Harrisburg and is at odds with Gov. Ed Rendell over how to close a $1 billion-plus deficit, the state's second large annual shortfall in a row.

Serious negotiations in the politically divided Legislature have begun in recent days, as legislators hope to avoid a repeat of last year's 101-day budget stalemate that forced a rash of layoffs and closures across the state's human services safety net.

On Monday, Rendell appeared at a rally in the Capitol Rotunda with public school advocates to tout his top priority, boosting spending on instruction and operations by more than $350 million, or 6 percent more than the $5.5 billion budgeted this fiscal year.

He warned that increased state support is vital to improve the future of the next generation and rescue districts that are closing schools and laying off staff amid falling local tax revenues.

"Without our funding, those cuts are just the tip of the iceberg," Rendell told the rally of teachers, parents and schoolchildren.

A budget that is not approved by July 1 will make eight straight fiscal years under Rendell that the state government has begun without an approved spending plan in place.

In February, Rendell advanced a $29 billion budget, or about 4 percent above the approved level this year. However, that quickly fell out of balance as tax collections continued to fall behind projections in the spring.

Spending cuts are almost certain to be a part of the solution — no one is saying where just yet or how much.

In the meantime, Rendell and his Democratic allies are pressing for a grab bag of tax increases and one-time accounting maneuvers to soften the blow and keep spending above $28 billion.

However, leaders of the Democratic majority in the House — where tax increase bills must originate — have been unable to assemble enough votes to increase taxes on Rendell's two prime targets: the booming natural gas industry and sales of assorted tobacco products.

That leaves Republicans who control the Senate to pursue a strategy of assembling a spending plan of about $27.5 billion, a 1 percent cut from this year's approved level. That amount is what budget makers believe the state will collect in taxes next year if no changes are made.

"It's tough," said Senate Appropriations Chairman Jake Corman, R-Centre. "A parade of people come to my office looking for resources. I have to have them before I can spend them. This is the world we live in, all of us. It's unfortunate."