With the national economic downturn and financial crisis posing the biggest threat to states fiscal health in 25 years, motorcoach operators and other private businesses need to step up their monitoring of state legislatures and brace for possible tax increases.

Reports for the first three months of the budget year that began July 1 -- for all but four states -- are grim, and officials expect further declines in tax revenue because of the housing slump, rising unemployment and the slowdown in consumer spending.

Pennsylvanias revenue collections fell about 5 percent below estimates made in July, producing the states largest first quarter shortfall in 30 years. A similar lag in Rhode Island has contributed to a record $67 million deficit with nine months left in the budget year.

South Carolina - slammed by high unemployment - pared its revenue estimate by 6 percent and now faces a $554 million shortfall.

"The bottom line is that states are facing a very difficult fiscal outlook over the next two to three years," Raymond C. Scheppach, executive director of the National Governors Association, said in a commentary for Stateline.org. "This economic downturn will likely be longer and more severe than any states have experienced since the downturn of 19821983."

The tight credit markets have caused problems for state governments just as they have for private borrowers.

Many state and local governments sell short-term notes or borrow money during periods when their funds are low and they are waiting for tax revenue to come in. The money is spent on such day-to-day operations as paying state employees. Governments also sell long-term bonds to finance expensive building projects on college campuses and on state roads and bridges.

State and federal officials are discussing ways the federal government could guarantee the sale of states short-term bonds despite Internal Revenue Service restrictions against federal guarantees of tax-exempt financial instruments.

Not every state depends on bond sales to finance its operations and building programs. And some did well in the first three months of the budget year, especially those benefiting from high oil and commodity prices. Montana has a surplus of nearly $1 billion over the next two years, creating a very different policy dilemma there: whether to set up a permanent "rainy day" fund just in case things go bad.

Meanwhile, the Rockefeller Institute has issued another of its periodic reports on state government finances. The data it analyzes are primarily from the second quarter of calendar 2008 and the report offers a gloomy picture.

While noting that the 2000-02 economic slow down was especially hard on state finances the worst, by some measures, in 50 years the report provides substantial reason to believe the current recession will be much more serious for them.

All the cyclical effects of the economy on income tax revenues will be present and magnified, and the support that real estate values gave to sales and property tax revenues in the earlier period will be missing and then some in the quarters to come.

Two further points to note: State motor fuel tax revenues were already down by the end of June by 3.4 percent over the same time in 2007, and costs for what states purchase were up 6.6 percent.

The Rockefeller report is available at http://www.rockinst.org/WorkArea/showcontent.aspx?id=15322.