Maryland Gov. Robert L. Ehrlich Jr. said he may summon the General Assembly into special session later this year and ask lawmakers to help balance the budget in the face of a shortfall projected to approach $1 billion for the second straight year.

"The reality of the fiscal situation is now beginning to hit home," Ehrlich (R) told reporters yesterday during an impromptu news conference in his State House offices.

Ehrlich said his budget secretary is "meeting with all the Cabinet officials and legislative leaders. We're drawing a map for them as to the fiscal condition of the state, and it's not terribly pretty."

Ehrlich said he has not decided whether the situation is sufficiently dire to warrant the first special session of the legislature since the recession of the early 1990s. But, he said, "I'm not ruling out anything."

Democrats, who control the assembly, said they see no need to return to Annapolis. During the regular 90-day session, which ended last week, legislators approved a plan to wipe out a record budget shortfall in the fiscal year that begins in July by cutting spending and raising taxes on homeowners, HMO premiums and corporations.

Ehrlich has vowed to veto part of the tax package aimed at business in retaliation for lawmakers' rejection of his proposal to raise fresh revenue by legalizing slot machines. That would open a $135 million hole in next year's budget, and it would dramatically increase the size of the shortfall looming the following year -- to as much as $930 million, Ehrlich said yesterday.

Senate President Thomas V. Mike Miller Jr. and House Speaker Michael E. Busch agreed that the state is facing its worst fiscal crisis in at least a decade. But the budget, for now, is balanced, they said. If Ehrlich throws it out of balance by vetoing taxes, it should be his responsibility to make further cuts to programs and services, they said.

"People elect a governor to lead. At this point in time, the governor needs to lead," Miller said.

Miller (D-Prince George's) said he has had no discussions with the governor or his staff about the state's finances or a special session. He said Ehrlich fails to "understand the issues involved" in calling a special session, which he said could cost the state as much as $45,000 a day.

Busch (D-Anne Arundel) said the governor and his staff have not spoken with him, either.

"I can't possibly understand what they're thinking about. I'm confused," Busch said. "He wants to veto taxes and protect corporate outliers from paying their fair share like everyone else. And somehow he wants us to make the cuts? I don't understand that. Given the option, we would rather override the veto [of the tax package]. Does anybody understand government here?"

Busch, who has been the target of a fierce Republican campaign to persuade voters to "blame Speaker Busch" for blocking Ehrlich's slots plan and forcing spending cuts, said he would be happy to participate in a serious effort to solve the state's budget problems. But given Ehrlich's refusal to consider any new taxes, Busch said he has no interest in helping Republicans establish the Democratic legislature as a political whipping boy.

"They want to put us out there like a shield. 'These guys made the cuts while we kept your taxes down. Blame Speaker Busch!' " Busch said.

Until yesterday, Ehrlich had said that he would take responsibility for making the cuts to next year's budget needed to replace the cash lost by vetoing taxes on business. Ehrlich had said he also expected to propose a balanced budget for the following year by cutting spending and identifying waste and inefficiencies in state government.

But in recent days, administration officials have been advised that state law requires them to include a massive increase in state aid to public schools in the budget they will propose in January. That means taking nearly $1 billion from other areas, including health care for the needy, higher education and aid to local governments for such key services as transportation and public safety.

Democratic legislative leaders said they suspect that Ehrlich is talking about a special session because he has realized that his campaign pledge to not raise sales or income taxes will inflict terrible pain on people he vowed to protect.

"One of two things is going to have to happen: huge, huge, huge, huge, huge cuts or some form of revenues," Miller said. "I know the administration has to be struggling right now. But difficult times are when leaders lead."

Gov. Robert L. Ehrlich Jr. says lawmakers may need to return to Annapolis for a special session, but Democrats disagree.