Everything from pay raises for teachers and state employees to tax cuts passed during the 2008 General Assembly session could be on the chopping block if the economy continues to stumble, a key lawmaker said Tuesday.

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Senate Appropriations Chairman Jack Hill (R-Reidsville), said budget writers are looking at a whole host of options as they try to decide how to address the state's latest fiscal crisis. Among the options are eliminating this year's 2.5 percent teacher and state employee pay raise. Tax collections have been down for months.

The state had to use $600 million in reserves to pay bills for fiscal 2008, which ended June 30.

"The numbers are sobering," Hill said. "The $700 million we approved in new spending for fiscal 2009, we're fixin' to go over that with a fine-tooth comb."

A new report out Tuesday by the Georgia Budget and Policy Institute says the state could wind up with a shortfall of $2 billion or more this year if tax collections continue to decline.

Gov. Sonny Perdue has requested some agencies prepare plans to cut 3.5 percent, but that would only save the state about $200 million. Most K-12 education and public health care plans were excluded from those cuts.

The Georgia Budget and Policy Institute called on lawmakers to hold a special session to work on the budget. The Atlanta-based budget think tank also recommended lawmakers look at raising cigarette taxes, reducing or eliminating property tax grants first approved in the late 1990s, eliminating or reducing the pay raises, and eliminating the special-interest tax breaks legislators approved during the 2008 session.

Hill said a special session would be needed if lawmakers choose to delay the tax cuts.