BOSTON -- As Wall Street took another dive, Beacon Hill braced for tough times, as local experts warned Tuesday that the effects of the crisis are unavoidable.

NewsCenter 5's Janet Wu reported that economists told House leaders that they should get out the chopping block -- and the piggy bank.

Capital gains and sales tax will shrink.

"Unemployment in the state is rising and appears to be rising rapidly. We know that consumer spending has been soft and is slowing. It is not keeping up with inflation," said UMass Boston economist Alan Clayton-Matthews.

"I think we are going to be short at least $1 billion and probably $1.5 billion and maybe even more," said Michael Widmer, of the Massachusetts Taxpayers Foundation.

He suggested cutting spending $500 million. Fiscal conservatives said that is not enough.

"We should cut $1 billion out of the state budget in fiscal 2009 in order to meet what we consider to be the revenue shortfall," said David Tuerck, of the Beacon Hill Institute.

"We are talking about the fall of next year, and I think that was probably the most optimistic view of anyone," House Ways and Means Chairman Rep. Robert DeLeo said.

Speaker Sal DiMasi said that the $2 billion stabilization fund may have to last a lot longer.

"I think that will be ill-conceived if we want to use all of that money. I think we should used that money over a three-year period," DiMasi said.

Yet, he is not ready to give Gov. Deval Patrick the power to cut the budgets of other branches of government without legislative approval.

"Municipalities across Massachusetts should be concerned. I think they should be prepared," DiMasi said.