The Buckeye State faces a potential shortfall of $7.3 billion in the two-year budget that begins July 1, almost certainly the largest dollar amount in state history. That's about a quarter of the $28.5 billion in discretionary state spending.

And if the federal government doesn't provide significant financial help to Ohio soon and holiday retail sales aren't "robust," the state likely will have to cut an estimated $640 million from the current budget, Strickland said.

"Our great state is confronted with challenges of historic proportions," the governor told reporters at a Statehouse news conference with Budget Director J. Pari Sabety, blaming "the collapse or near-collapse of the national economy."

Multibillion-dollar cutbacks would affect all Ohioans by forcing extensive cuts in state services, possible closure of state facilities and the layoff of hundreds, if not thousands, of state workers.

Today, Strickland and virtually all the nation's other governors are meeting in Philadelphia with President-elect Barack Obama and Vice President-elect Joe Biden to plead for more federal help for struggling states.

Strickland sent a letter to Obama yesterday asking for a $100 billion bailout of state governments across the country and $3.2 billion more for state welfare needs, as well as approval of the $25 billion federal bailout for the Big Three American automakers.

House Speaker Nancy Pelosi indicated that as soon as the 111th Congress convenes Jan. 6, lawmakers will work to pass a massive -- $500 billion or more -- stimulus package that can be sent to the White House for Obama to sign when he takes office Jan. 20.

In the Senate, Democrat Sherrod Brown of Ohio also vowed that Obama will have a major stimulus package to sign on his first day or first week in office.

Strickland said for the first time yesterday that it's likely that the state will tap its $748 million rainy-day fund. He also continued to defend the income-tax cuts enacted in 2005 and ruled out a tax hike.

But assuming that spending remains at current levels, the deficit for the next two-year budget is projected to be $7.3 billion. If agencies cut spending by 10 percent, the deficit still would be $4.7 billion, Strickland said.

The administration already has made $1.3 billion in reductions and other adjustments to the current budget, but Sabety outlined in charts how state revenue forecasts have deteriorated in just the past 10 weeks.

Sabety said during the next two years, Ohio will face "the most serious erosion" in tax revenues in decades. She noted that sales-tax revenues are expected to decline for two straight years for the first time since 1950, and Ohioans' total wages could decline in fiscal 2010 for the first time ever.

"These are, indeed, historic times," she said.

The Strickland administration estimates that Ohio's welfare budget will be more than $23 million in the hole when the fiscal year ends June 30. A month ago, that deficit was projected at $5.2 million.

Strickland spokesman Keith Dailey said growing needs among Ohioans led to higher-than-anticipated spending. In past years, he noted, funds for job-training programs and other services went unspent, but not so much this year.

Legislative leaders agreed that the state's budget situation is precarious but said yesterday they still plan to move forward with a $125 million plan to provide bonuses for veterans since the Gulf War, likely taken from the rainy-day fund.

Just before Strickland talked about Ohio's needs, leaders of the National Governors Association and the National Conference of State Legislatures met with reporters in Washington to put the situation into a national perspective.

Pennsylvania Gov. Ed Rendell, chairman of the governors association, said that 43 out of 50 states are facing billions of dollars worth of deficits and the need for big cutbacks in services, many for the neediest citizens.

Strickland conceded that many of the budget adjustments in Ohio so far "have come at a time when people are relying more than ever on state services."

The governor was elected in 2006 with a pledge to "Turnaround Ohio," and Kevin DeWine, deputy chairman of the Ohio Republican Party, said yesterday that Strickland has "spent much of his first term blaming everyone else for the spilled milk rather than finding a way to clean it up."

But Strickland said he's trying to be honest and open about the economic crisis.

"We believe this is the time for all Ohioans to join together in an extraordinary partnership in order to meet the challenges before us."

mniquette@dispatch.com

jsiegel@dispatch.com

jriskind@dispatch.com