WASHINGTON — A new study recently released by the National Conference of State Legislatures shows that state finances are deteriorating–in some cases considerably–and may threaten state-provided services.

Many state lawmakers are confronting the two-fold problem of keeping their fiscal year 2008 budgets in the black and enacting balanced budgets for 2009. State budgets fund state agencies, including the bank and credit union regulators.

State Budget Update: April 2008 is based on information collected from legislative fiscal directors in April. It covers the revenue and expenditure situation for the first three quarters of fiscal 2008 for most states. It includes information on revenue performance, spending overruns, projections of budget gaps in 2008 and 2009, the revenue outlook for next year and the overall fiscal situation in each state.

“The current health of state budgets is very uneven,” said NCSL Executive Director William T. Pound. “For energy-producing states, the fiscal situation is strong and the outlook is good. But that situation is in stark contrast to states where the housing sector slump has been particularly severe or other fiscal challenges have prevailed.”

State officials expected revenue growth to slow in fiscal 2008, but not as dramatically as it has so far this year, the report (www.ncsl.org) found. Since the November 2007 edition, revenue problems and many previously identified budget holes have deepened.

“Whether or not the national economy is in recession is almost beside the point for some states,” Pound said. “The fiscal situations have declined so much in some states that they appear to be in a recession.”

The housing downturn means less revenue will be reaped in coming months, as consumers react to high gas and food prices by pulling back on housing related purchases like appliances and furniture, exacerbating the problem.

According to the NCSL, California will face a budget shortfall of $16 billion over the next two years, and the gap is increasing in Florida and other states where home prices escalated in boom times. Twenty-three states and Puerto Rico have already reported budget shortfalls totaling $26 billion, it said. Many states are already in recession.

Some states have benefited from oil price climb, however, including Alaska, North Dakota, Louisiana and Wyoming, where economies are energy-related. But many states are contemplating tax increases and are tapping into their rainy day funds, said the NCSL.

–cburger@cutimes.com