NASHVILLE, Tenn. -- As much as $500 million may have to be cut out of the upcoming state spending plan amid worsening tax revenue projections, Gov. Phil Bredesen said Wednesday.

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The budget hole would rival the shortfall that greeted the Democrat when he came into office in 2003.

"I'm going to have to do some sail-trimming and maybe toss some baggage overboard to keep the ship afloat," said Bredesen.

But the governor said the state is in a better position today to deal with the challenge because of robust reserves and better planning.

"We are in a vastly different and stronger position than we were in 2003," he told reporters after an event touting pre-kindergarten education. "Any cuts you make are painful, but there's no issue with being able to close the books of the state."

One likely victim may be the governor's plan to add $25 million to the state's pre-K program. But Bredesen said he will still call for a more modest increase.

"Given the depth of some of the other cuts we're tying to make, to keep $25 million in there would be just asking the Legislature to take some of it and put it somewhere else," he said.

But Bredesen said he will still push for education funding despite the bleak budget picture.

"I'm just trying to keep everybody's focus on the fact that education is the thing we cannot afford to cut, we've got to keep growing it and investing money in it," he said.

When the governor presented his original spending plan to the Legislature in January, he expected to have to deal with a shortfall of $165 million. By last month that budget gap had risen to $276 million.

"We are trying to see if there are different ways we can continue to address what we believe are the important things to do in those areas. But it means we will not be able to do what we proposed," said State Finance Committee representative Dave Goetz.

Senate Speaker Ron Ramsey said the dollar amount of the new shortfall projections is daunting.

"It is a severe number," said Ramsey, R-Blountville. "And the irony is last time this year we had a half a billion in the other direction, so you can't ever tell what the economy's going to do."

Senate Democratic Leader Jim Kyle, of Memphis, warned that the budget shortfall may cause significant changes in state government operations.

"We're getting to the point where actual services are going to be eliminated as opposed to reduced," he said.

Rep. Glen Casada said the state may have to work with smaller figures.

"For example, if we wanted to spend $300 million new in education, that may need to be whittled back to a smaller number -- still more than last year – but not as much as we would like to spend," he said.

Each state agency will be asked to review its books, and employee pay raises could suffer.

Officials said the state lottery surplus money cannot be tampered with because it’s already allocated to other programs.

Officials are scheduled to meet next week to officially set new projections for the budget year that begins on July 1.