SPRINGFIELD — Facing a $5 billion deficit, Gov. Rod Blagojevich today proposed a smaller budget balanced with a patchwork of spending cuts, higher taxes and fees and short-term fixes that include selling the state’s Chicago headquarters.

Blagojevich, a Democrat who campaigned last year on a promise not to raise taxes, postponed his budget address by two months in the face of what he calls the state’s worst-ever fiscal crisis.

Now he will try to persuade fellow Democrats who control the Legislature to go along with a $52.4 billion spending plan that is actually smaller than last year’s budget by $345 million and includes painful choices following years of big spending under former Republican Gov. George Ryan.

Prisons that are ready to open would stand empty for another year. University budgets would be cut at least $112 million. Construction of new state buildings would practically halt. Thousands of employees would miss out on raises and pay more to their retirement funds. Many jobs emptied by early retirement would go unfilled, but there would be no layoffs.

Education would see a 3.1 percent increase in state aid, and schools would be guaranteed $250 more to spend on each student. A shuttered prison would reopen as a drug-treatment center. The government would provide health insurance for an additional 20,000 poor children and 65,000 adults.

“I see this budget as an opportunity,” Blagojevich said in the prepared text of his address to the Legislature. “An opportunity to bring about the fundamental changes that the people of Illinois demanded last November. An opportunity to shake up a system in desperate need of reform.”

He warned lawmakers that he would veto any budget that raises income or sales taxes or cuts spending on elementary and secondary education, health care or public safety.

Blagojevich’s speech included a litany of agencies facing cuts, from the Department on Aging to the Illinois Arts Council. “This is a budget where we’ve made difficult choices,” he said.

After taking office Blagojevich began stressing that he would not raise “general taxes” — the income and sales tax.

His budget proposal keeps general taxes in check. But it would end several sales tax exemptions — on out-of-state natural gas, for instance, or airplanes — and would keep the state inheritance tax although the federal version is being phased out.

He also wants to raise taxes on riverboat casinos. Among the increases: a 70 percent tax on all their revenues above $250 million, up from the current maximum of 50 percent.

Businesses would pay about $350 million more in higher fees for everything from liquor licenses to filing annual reports with the state.

Hundreds of special government funds would be charged fees to cover administrative services, such as accounting, now paid for by general tax revenue. Tapping into the money sitting in these funds would bring in $330 million a year.

Blagojevich proposes selling some state property — including the government’s Chicago headquarters, the James R. Thompson Center. The state would lease the building back for 20 years, owning it again outright at the end of the lease.

The administration expects to get $200 million immediately through the sale, paying $300 million over the life of the lease.

Word of the possible sale leaked out before Blagojevich’s budget speech, and lawmakers immediately criticized the idea. It “smacks … of being desperate,” said Sen. Donne Trotter, the Senate Democrats’ chief budget negotiator.

That is far from the only contentious proposal in the governor’s plan.

Casinos and their army of lobbyists are likely to oppose the tax increases — or at least demand permission to expand as a trade-off.

Each special interest group with its own special fund could fight efforts to charge for the state’s administrative costs.

Business groups may fight the idea of ending sales tax exemptions or increasing business fees.

And some lawmakers are likely to argue that Blagojevich’s plan depends too much on one-time revenues and not enough on permanent cuts, making another deficit likely next year.

“You’re essentially deferring decisions,” said Sen. Steve Rauschenberger, chief budget negotiator for the Senate Republican caucus. “It wouldn’t be the way I’d construct the budget for the future.”

The one-time sources of cash include selling property, a $1.9 billion borrowing plan to come up with money for state pension systems and $350 million from selling a casino license now tied up in court battles.

Blagojevich’s budget director, John Filan, acknowledged the budget proposal does not solve all the state’s long-term problems. He said they will work on more permanent solutions during the coming year.

But the administration pointed to changes that it says amount to fundamental reforms — consolidating purchasing duties to save $91 million, for instance, and combining all agencies’ legal and auditing work to save $44.5 million.

The state’s financial problems have been mounting for several years, a result of climbing expenses — especially for medical care — and revenues dropping sharply after the stock market bubble burst.

Lawmakers and Ryan fought the problem last year by cutting spending in some areas and raising taxes on cigarettes and casinos.