State revenues could be higher than expected this budget year, but are most likely going to fall short by as much as $150 million, lawmakers were told Tuesday.

The latest revenue update presented to the Executive Appropriations Committee means the projected shortfall faced by the 2010 Legislature could be as high as $850 million.

Or it could fall to $650 million, if the more optimistic forecast for revenues in the budget year that ends June 30, 2010 comes to pass. The annual September update offers a range of between $50 million in the black to $150 million in the red.

But Andrea Wilko, chief economist for the legislative budget office, suggested lawmakers should brace for less money, not more.

"It will be a slow recovery," she said, noting Utah lags behind the national average in retail sales, personal income and other key indicators.

"I think we need to be very cautious as we move forward," House Speaker Dave Clark, R-Santa Clara, said.

No one is talking about the need for a special session to address a possible shortfall. But lawmakers are already gearing up to make up an estimated $700 million in the next budget year, which begins July 1, 2010.

The next revenue estimates are due in December and should give lawmakers a better idea what to expect when they convene in late January. There was already talk of tax increases, even before Tuesday's update.

Clark has said lawmakers need to look at raising selected taxes including those on alcohol and tobacco, by $100 million. Tuesday, he said it would be hard to ask taxpayers for more.

"Another $150 million would be painful," Clark said.

Senate Majority Leader Sheldon Killpack, R-Syracuse, said lawmakers have little choice but to cut deeper if revenues decline.

"We knew the day of reckoning would come," Killpack said. "I don't see how you can avoid more cuts if that shortfall exists."

State agencies have already been told to expect another hefty budget cut next year on top of the 9 percent they've already slashed because there won't be federal stimulus dollars to help plug the revenue gaps.

Utah Commissioner of Higher Education William Sederburg assured the committee the state's colleges and universities were ready to make the 17 percent reduction lawmakers have said will be needed.

That means cutting as many as 600 higher education employees next year on top of the jobs already lost "with minimal whining," Sederburg said. "We're just nervous if you ask us to do more, it's going to force us to make some very bad decisions for the future of this state."

State Human Services Executive Lisa-Michele Church said her agency has already been hit hard.

"These aren't paperwork reductions. These are real people," Church said of the 274 positions cut this year. "It's very painful."

She repeatedly asked the committee to give her direction for next year's round of reductions, asking if the Legislature intended to scale back social services now mandated by law.

House Budget Chairman Ron Bigelow, R-West Valley, said policy changes will be proposed at the committee's next meeting in October.

"Just deal with it the best you can," Bigelow advised Church. "We know we are past the point of eliminating vacant positions and eliminating ineffective programs and waste."