HARRISBURG, Pa. -- For the 7th straight year, Pennsylvania began its fiscal year without a state budget.

Lawmakers negotiated late into the night on Tuesday, but were unable to reach an agreement.

The main obstacle is a 3-year, 16 percent income tax increase proposed by Gov. Ed Rendell.

"There is no way to have a constitutionally signed and passed budget without revenue increases," Rendell said.

Republicans oppose the increase, and are in favor of cutting spending.

"People need to be able to spend their money as they see fit -- whether it's a new fridge, or they want to take a vacation, or they want to put it in the bank to save," said Rep. Mike Turzai. "Why would the governor take their money during these tough times? It makes no sense."

Because there is no budget, state workers will see smaller paychecks. They'll get partial paychecks on July 17 and 24. After that, their paychecks will be withheld entirely until a budget deal is reached.

Rendell said there are no talks scheduled for Wednesday. He also said most Pennsylvania residents will not see a change in state services.