RALEIGH, N.C. — Gov. Mike Easley said Tuesday that state agencies might have to dig a little deeper soon, given the uncertain economy.

Easley last month called for state agencies to cut their annual budgets by 2 percent, and he said Tuesday he likely will expand those cuts to 3 percent in the face of a slowing economy. He wants to reduce costs by about $700 million so his successor doesn't face a ballooning deficit in January.

"The important thing is (that) I start saving money and reducing costs so that you've got six months under the belt by the time the next governor gets here," Easley said.

Tax collections for the fiscal year that began July 1 were as much as $70 million below projections through August. September figures aren't in yet.

A 3 percent cut to the $21.4 billion state budget would appear to save about $600 million, but the actual savings would be less because public education, Medicaid and student financial aid are exempt from the cuts.

North Carolina's $800 million reserve fund will help cushion the state if tax revenues drop more than than expected, Easley said.

The 55,000 members of the State Employees Association of North Carolina are familiar with lean years in which they receive extra days off or small bonuses in lieu of raises, said Ardis Watkins, legislative affairs director for SEANC.

She added, however, that their anxiety is compounded this year because financial problems with the State Health Plan have prompted talk of higher insurance premiums.

"There's no fat, according to Easley, in the state budget. So what would you cut? You would cut services that taxpayers have been paying for," Watkins said. "I anticipate it will be a year of many challenges."

Joseph Qubain, who has worked for 17 years as an engineer with the state Department of Transportation, said he considers himself lucky in that his wife also works. But he gets defensive for his fellow state workers when it comes to pay raises.

"We understand the situation is not as good as we want it to be, but we cannot balance future state budgets on the backs of state employees," Qubain said.

States from Virginia to New York to California are also predicting serious budget shortfalls this year.