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Hartford (WTNH) – There’s new talk of cutting the budget before the next regular legislative sessions begins. Governor Rell said it’s time to bring out the axe, as we’re looking at another deficit.

The latest estimate of the two month old state budget shows an estimated $634 million in red ink and growing.

Unemployment claims continue to pour in to the state call-in center and the State Unemployment Fund is now dry so the state will now be borrowing from the federal government at a rate of $20 million per month and it must be paid back income tax receipts continue to decline.

“That, and the ‘Sales Tax’ are our two biggest generators of income for the state; both of those categories have shown decline since the revenue estimates were adopted,” said Governor Jodi Rell.

So today, Republican leaders called on the Democratic Leadership to call lawmakers back to Hartford immediately.

“We can’t borrow any more money and we’ve already raised taxes on the people of the State of Connecticut by a billion and a half dollars; the only responsible thing left to do is cut spending,” said Senator John McKinney.

But the Speaker of the House said “no” because Democrats believe the state and nation is turning around.

“We are just in the begining of a recovery and I’m optimistic that we will make a recovery,” said State Rep. Chris Donovan.

But the Speaker also admitted today that a scheduled half a percentage point cut in the state Sales Tax, scheduled for January 1st, is not going to happen because the state can’t afford to lose the revenue.

He also said today that a scheduled cut in the State Inheritance Tax should also be canceled. Current law exempts the first $2 million of estates from the tax. At the Governor’s insistence, that was raised to $3.5 million. But Donovan said the state can’t afford to lose that revenue and that it’s not fair.

“People are very concerned in these times of bailouts, etc., that the wealthy are getting tax breaks and so we’re certainly looking into that,” said Rep. Donovan.