The state House yesterday approved its draft of the two-year state budget, but with an asterisk.

The draft was written before the state Council on Revenues downgraded the state’s revenue forecast last week, which increased the projected deficit to nearly $1 billion from about $700 million.

The House version of the budget — about $10.9 billion in state spending in each of the next two fiscal years — is paired with nearly two dozen revenue-generating bills to help reduce the deficit. House leaders have acknowledged that new revenue or spending cuts will likely be necessary as the budget focus shifts to the state Senate Ways and Means Committee.

Gov. Neil Abercrombie has also asked the Council on Revenues to consider re-evaluating the forecast to reflect the state’s tsunami cleanup costs, the likely decline in tourists from Japan because of the earthquake and tsunami, and rising oil prices from the social and political upheaval in Africa and the Middle East.

"We have to be careful we don’t make rash assumptions out of that situation as well," Aber­crom­bie said yesterday. "We’re going to try and put it together, try and give the council as much information and data as we can, or give them as much leeway as they think they need to have, in order to reach out to give a little bit more comprehensive and insightful analysis for a report."

State Rep. Marcus Oshiro (D, Wahiawa), chairman of the House Finance Committee, said state revenue collections may not meet the council’s downgraded forecast.

"We all need a reality check because we simply do not have the money to pay for the government services we currently have, and we don’t seem willing to pay for the government services we want," Oshiro told House colleagues.

State House Minority Leader Gene Ward (R, Kalama Valley-Hawaii Kai) questioned whether the community could afford the proposed budget. He also warned that raising the general excise tax — the state’s largest source of revenue — may be on the horizon as an option.

"But I think the reality check is not whether there is a free lunch or not," he said, "it’s whether the people of Hawaii can afford lunch, can feed and house and take care of themselves, given the burdens that we’re shifting from government to them, from the public sector to the private sector."

Several House Demo­crats said Republicans, while critical of some of the revenue-generating ideas, have not offered substantive suggestions to balance the budget.

Abercrombie said he has been in discussions with House and Senate leaders about options to reduce the immediate deficit for the fiscal year that ends in June, as well as the two-year budget draft. He would not go into specifics, but lawmakers have previously suggested the governor may have to tap the state’s hurricane relief fund and rainy day fund to get through the fiscal year.

"We’re going to have to raise even more money over the next four months just to get to the starting line," the governor said.

Asked his position on raising the general excise tax to help with the two-year budget draft, the governor answered: "Flex­i­ble."

Abercrombie, however, later released a written statement that said: "Raising the rate of the general excise tax is not currently being considered. We are exploring many other options and discussions have been positive."