Gov. Charlie Baker will have to tangle with tough fiscal realities as he prepares his state budget for next year. For the second consecutive year, Baker will face yet another huge budget deficit.

The Massachusetts Taxpayers Foundation estimates Baker and his budget writers will have to fix a structural deficit of between $800 million and $1 billion dollars when Fiscal Year 2017 starts in July.

"Next year is going to be a tough budget, but whatever the number is, last year's budget was 1.8 billion in the hole when we began the process. This one is going to be in the hole by a number that's significantly less than that," Baker told WGBH News Wednesday.

Much of last year's deficit was corrected with one-time options that won't be available this time, leaving few choices beyond cuts to personnel and services.

"We're facing a sizable budget gap and some of the ways we've used to close the budget in the recent past aren't on the table," Eileen McAnneny, the Taxpayer Foundation's president told WGBH News.

This is not good news for reformers who are looking for improvements to the MBTA and Department of Children and Families.

One of those stopgap measures entailed tapping into the state's "rainy day fund". That fund is intended to cushion vital state programs during recessions. At the moment, the rainy day fund hovers around $1.25 billion, that well below the generally accepted $2.5- to $3.0- billion level.

"We really do need to replenish that" McAnneny said of the fund. "It's really critical that we build that up" as some of the state's credit agencies are beginning to take notice of our dwindling reserves.

McAnneny said Baker and Democratic budget writers in the Legislature would have to look at line items to see if there are opportunities to cut costs or find efficiencies.

"I fully expect that we will find our way through to a balanced budget by the end of this session and it'll be one that protects the taxpayers and continues to deliver for the people of Massachusetts," Baker said.

Baker's set to file his budget recommendations for the next fiscal year next month.