HARTFORD (AP) — Connecticut Gov. Dannel P. Malloy said Tuesday he is considering tax changes that would help make the state's business climate more competitive in his new two-year budget proposal.

The Democrat didn't elaborate on what those changes might be. However, he said there would have to be some "adjustments" in the budget to cover the cost of those tax modifications.

Malloy said his budget package, expected to be unveiled in February, is still being drafted.

Next year, like recent ones, is expected to be a difficult budget year, given Connecticut's continuing fiscal challenges. Besides new estimates that show slower-than-expected state revenues next year, Connecticut is facing higher-than-anticipated state pension costs and retiree health care costs. Also, the final payment is due for funds the state borrowed in 2009 to balance the budget.

A report released Tuesday by the administration's budget office estimates a $1.3 billion shortfall in next fiscal year's main spending account, the general fund, which is traditionally about $18 billion. Malloy said, however, he doesn't expect having to "raise a lot of additional dollars" through tax increases in the new budget.

The General Assembly's Office of Fiscal Analysis released a similar report, predicting next year's general fund will be $1.2 billion in the red.

State lawmakers are scheduled to be briefed on the budget situation on Nov. 30.

Meanwhile, Malloy's report estimates the general fund account for the current fiscal year, which ends June 30, is $67.7 million in deficit. Malloy said he doesn't foresee calling lawmakers back to the state Capitol for a special session, despite calls by legislative Republicans to deal with the problem now. The next regular session begins in January.

The Office of Fiscal Analysis projects the current fiscal year to have a $77.5 million general fund deficit.