HARRISBURG — Pennsylvania state government is facing its biggest first-quarter shortfall in at least two decades, which could force Gov. Ed Rendell and legislators to dip into reserves, cut programs or raise taxes — or do all three.

"There's no way out," Senate Appropriations Chairman Gibson E. Armstrong, R-Lancaster, said Thursday. "There's no appetite to raise taxes. ... We're not going to make any friends on this, but if we don't (cut programs) now, we just exacerbate the problem if we wait."

The Revenue Department reported this week that the state government's revenue collection in the July-September quarter was behind the official revenue estimate by $281.4 million, or 4.7 percent. Also worrisome is that the $5.8 billion collected over those first three months is almost 3 percent behind last year's collections during the same period.

A 4.7 percent shortfall projected over the entire July-June fiscal year would tear a gaping $1.3 billion hole in the budget, prompting Armstrong to say deeper spending cuts in the $28.3 billion budget seem unavoidable.

Armstrong has scheduled a committee hearing for Monday to get an assessment from the Rendell administration and economists on Pennsylvania's darkening revenue performance and outlook amid a slumping national economy.

Last month, Rendell froze hiring, banned out-of-state travel and cut other spending to save $200 million in light of the weakening national economy. He also asked the Legislature, judiciary and independent state agencies — including the higher education system and attorney general's office — to cut spending.

The 4.7 percent gap is the largest first-quarter shortfall against projections since at least 1988, based on a review of available Revenue Department reports by The Associated Press.

However, House Finance Chairman David Levdansky, D-Allegheny, said it is too early to make drastic spending cuts, and that Rendell may be able to hold the line by trimming around the margins of discretionary items.

Still, Levdansky and Armstrong agreed that the state's budget reserve of more than $700 million for "rainy day" situations will have to be tapped this year.

"It's certainly raining," Levdansky said. "The question is, is this going to be a little shower or a thunderstorm, and how long will it last?"

Already, some are warning that the state's hiring freeze will risk public safety if fewer workers are on duty in such places as mental hospitals and prisons. A labor union that represents employees that provide many social services warned Thursday that demand for public services will rise as the economy worsens.

"Imagine calling 911 emergency services and being put on hold, having to wait for immediate help for your aging parent; fewer services for the blind and visually impaired, the handicapped, and the poor," said Kathy Jellison, the president of Service Employees International Union Local 668.

The budget, signed in July, raised spending by about $1 billion, or 4 percent, while relying on at least $500 million in one-time cash freed up by postponing payments and tapping surpluses. Much of the increase in spending went to public schools and welfare programs that serve the poor, elderly, mentally retarded and disabled.

The fiscal year is still young and the biggest collection months are still to come, but the shortfall is deepening. August and September showed nearly identical shortfalls of more than 6 percent after a 3.6 percent gap in July.