State leaders are bracing for what will likely be another gaping hole in the state budget early next year.

I don't think we're going to be sitting here talking about trying to find $15 million," said Rep. John Gard, R-Peshtigo, co-chairman of the Legislature's Joint Finance Committee. "I think we're going to be talking about big amounts, and we're going to have to have people show some leadership."

Todd Berry, executive director of the Wisconsin Taxpayers Alliance, a nonprofit group that monitors state finances, paints a starker picture.

"This will worsen by hundreds and hundreds and hundreds of millions of dollars," Berry said. "You have to start to think about what was in the budget that created new spending. You have to start rolling back."

Both men caution that they don't have hard numbers yet to show that state tax revenue has slowed since the terrorist attacks Sept. 11. But few if any state leaders expect tax revenue to increase by $600 million this fiscal year and $400 million on top of that the following year, as the Legislative Fiscal Bureau predicted back in May.

It was those projections that the governor and Legislature relied on when approving the two-year, $46.9 billion state budget in August. The budget covers state spending from July 1, 2001, to June 30, 2003.

Republican Gov. Scott McCallum said last week that "budget adjustments" will be needed. As a first step toward saving money, his secretary of employment relations, Peter Fox, said more state jobs that become vacant will be left unfilled, and overtime may be reduced or eliminated.

Further, more severe cost­cutting measures are likely to dominate the Legislature's debate in January, when the Legislative Fiscal Bureau re­estimates tax revenue growth based on the previous six months of data.

Rick Chandler, secretary of the state Department of Revenue, acknowledged that the McCallum administration is crafting contingency plans for what to do if and when revenue numbers fall.

"There's a range of possible options if there is a significant drop in revenue," Chandler said. "There's a very lengthy list of options. I wouldn't say any would be preferred."

Chandler wouldn't share the list, he said, because he doesn't want to unnecessarily alarm groups that could be affected.

Berry said state leaders have already exhausted the easy options. Last summer, they dipped deep into proceeds from a settlement of a lawsuit against the tobacco industry to fill a $760 million budget shortfall. They also restructured state debt to reduce payments and delayed a $115 million school aid payment, although McCallum later demanded that the payment be made on time.

Making matters worse is a projected deficit -- calculated before Sept. 11 -- at the start of the next state budget on July 1, 2003.

"Any of the options that have been unthinkable are going to be on the table -- school aid cuts, state aid cuts to counties and municipalities, UW tuition hikes," Berry predicted.

Unlike other states such as Minnesota and Michigan, Wisconsin doesn't have a budget surplus or other money socked away to ease the pain of dropping tax revenue, Berry said.

"When you don't have surplus and you don't have a budget stabilization fund, you are very vulnerable to economic shock," he

"So I would not pin this on Sept. 11," Berry continued. "Yeah, it's going to make things worse. But we created this position of extraordinary vulnerability before Sept. 11."

Sen. Brian Burke, D-Milwaukee, the other co-chairman of the Joint Finance Committee, said he hopes the governor will take the lead by proposing a budget adjustment bill in January. Burke agreed that budget problems are likely. But no one knows for sure what the future holds, he said.

"Between now and the December holiday, we'll know whether or not consumer retail demand picks up substantially," which could increase sales tax collections, Burke said. "We could come out of this with a pent-up release of demand."

If that happens, more companies might start hiring instead of laying off workers, he said.

Gard agreed that "we're all sort of guessing right now." But at least in the short term, "we have to govern very fiscally conservatively," he said.

Burke and Gard agreed that a national tax cut could help stimulate the economy. President Bush and many in Congress are pushing such a plan.

That said, the airline, insurance and tourism industries are especially hurting in the wake of Sept. 11, and many Wisconsin manufacturers continue to lay off workers. Consumer confidence and the stock market are down.

"Almost every way you look at it, there's just a huge amount of uncertainty out there," Chandler said. "The idea that there would be some impact on economic growth and on our collections is logical. We just need a little time to come up with specifics."