HARRISBURG — Gov. Ed Rendell said Thursday he has identified $311 million in potential spending cuts to offset a decline in state tax revenues spurred by a faltering economy.

The largest reductions are $72 million from the Public Welfare Department and $78 million in education spending, but the administration also plans to cut $35 million from community and economic development and $27 million from corrections.

"If the economy somehow turns around and tax revenues begin to meet expectations, then these funds will be available to the agencies to use as was expected," said Chuck Ardo, an aide to the Democratic governor.

He said layoffs are not currently anticipated. In the past month, state governments facing budget problems have ordered or considered layoffs in Maryland, Virginia, South Carolina, Rhode Island and Illinois.

Senate Majority Leader Dominic Pileggi, R-Delaware, said the shortfall could reach $2 billion and deeper cuts to the $28.3 billion budget are warranted.

The state "will need to do much better than a simple 1 percent cut in spending to match the dramatic decrease we have in our revenues," Pileggi said.

The State System of Higher Education found $22 million worth of belt-tightening. Rendell said another $39 million can be saved if the General Assembly and other independent state entities slash 4.25 percent from their expenditures.

The state has a "rainy day fund" budget reserve of almost $750 million, but many fear the current July-June fiscal year's shortfall could exceed $1 billion.

One month ago, the state Revenue Department said revenue collections in the July-September quarter lagged $281 million behind what had been anticipated. Updated figures are due today.

Rendell has frozen hiring, banned out-of-state travel and ordered agencies under his control to come up with reductions.

On Thursday, the governor warned that economic conditions could continue to deteriorate but said "dire predictions" would be counterproductive.

"We need to focus on the spending reductions announced today and use the expertise we developed in the past six years to continue improving government efficiency," he said in a release.

Rendell pressed the General Assembly, which is sitting on a massive surplus, to do its part, along with other independent entities such as the auditor general's office, the attorney general's office, the Treasury Department and the court system.

Pileggi said Senate Republicans have cut the number of caucus employees from 452 to 411 in the past two years and reduced their appropriation by 6 percent, a process he said would continue.

Reducing the Legislature's surplus, he said, "has actually been led by us. We haven't gotten the support of other caucuses in that regard, and (it is) something we're willing to discuss."

Tom Andrews, a spokesman for House Majority Leader Bill DeWeese, D-Greene, referred questions about Rendell's proposal to Appropriations Committee Chairman Dwight Evans, D-Philadelphia. Evans' spokeswoman, Johnna Pro, said "House Democrats will certainly try" to cut spending 4.25 percent.

Kevin Harley, a spokesman for Attorney General Tom Corbett, said that although Corbett's budget "has already been cut to the bone," he intends to seek further cost reductions.