Many states appear to be in recession as deficits grow

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The finances of many states have deteriorated so badly that they appear to be in a recession, regardless of whether that's true for the nation as a whole, a survey of all 50 state fiscal directors concludes.

The situation looks even worse for the fiscal year that begins July 1 in most states.

''Whether or not the national economy is in recession -- a subject of ongoing debate -- is almost beside the point for some states,'' said the report to be released Friday by the National Conference of State Legislatures.

The weakening economy is hitting tax revenue in a number of ways: People's discretionary income is being gobbled up by higher food and fuel costs, while the tanking housing market means people are spending less on furniture and appliances associated with buying a house.

The situation is grim in Delaware, with a $69 million gap this year, and bleak in California, with a projected $16 billion budget shortfall over the next two years, the report said. Florida does not expect a rapid turnaround in revenue because of the prolonged real estate slump there.

By mid-April, 16 states and Puerto Rico were reporting shortfalls in their current budgets as the revenue those budgets were built on -- typically, taxes -- fell short of estimates. That's double the number of states reporting a deficit six months ago.

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