HARRISBURG — The diminishing chances that Congress will extend financial aid to recession-wracked states darkened Pennsylvania's already gloomy budget picture Thursday as budget talks between Gov. Ed Rendell and Republican lawmakers slowed to a standstill.

Rendell, a Democrat, repeated his warning that 20,000 teachers and employees at all levels of Pennsylvania government will lose their jobs if all of the $850 million in extended federal aid that he expects does not materialize. Deep program cuts would be necessary, including wiping out a hefty 6 percent increase he has sought for public school instruction, he said.

With Pennsylvania trying to close a $1 billion-plus deficit this fiscal year, Rendell is seeking a $28.2 billion budget for the fiscal year beginning July 1; that total would be about a 1 percent increase over this year's approved amount.

Rendell would sustain the higher spending by hoping for a healthy recovery in the state's revenue collections, while passing new taxes on natural gas extraction and sales of tobacco products and tapping funds dedicated to health care, anti-smoking and environmental causes.

There would be no general tax increase on sales or personal or corporate income.

Senate Republicans, however, insisted that he pare it down by $400 million by eliminating the proposed spending increase for public school instruction — Rendell's top priority — and discretionary economic development money.

Slashing the spending would eliminate the need to tap outside funds or raise taxes, they say.

"I would say we're at an impasse and we need to continue to work through it," Senate Majority Leader Dominic Pileggi, R-Delaware, said later in the day Thursday.

Rendell argues that the extra money for public schools is necessary to help districts that are closing schools and laying off staff to deal with a nearly identical shortfall in local tax collections statewide.

The $850 million in federal aid appeared likely when Rendell originally proposed his spending plan in February. On Thursday, Republicans in the U.S. Senate defeated a $33 billion bill that, among other things, would extend financial aid to deficit-ridden state governments.