The finances of many states in the United States of America have deteriorated so badly that they appear to be in a recession, regardless of whether that is 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 that was to be released Friday by the National Conference of State Legislatures (NCSL).

Hitting tax revenue

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 US$69 million gap this year, and bleak in California, with a projected US$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 is double the number of states reporting a deficit six months ago.

The NCSL said the news is even worse for the upcoming fiscal year, with 23 states and Puerto Rico already reporting budget shortfalls totalling $26 billion. More than two thirds of states said they are concerned about next year's budgets.

The results are consistent with a drumbeat of bad economic news for states that several budget groups have produced in the past few months.

Budget shortfalls

Last week, the Washington-based Center on Budget and Policy Priorities said 27 states are reporting projected budget shortfalls next year totalling at least US$39 billion.

President Bush said Tuesday that the economy was not in a recession but in a period of slower growth. However, some economists have pointed to the string of declines in manufacturing orders to argue that the economy has fallen into a recession.

Bolstering their position, the Commerce Department reported Thursday that sales of new homes plunged in March to the lowest level in 16 1/2 years.

Sales falling

The government also reported that orders to factories for big-ticket goods fell for a third straight month in March, the longest string of declines since the 2001 recession.

Some states "have declined so much that they appear to be in a recession," the NCSL report said.

It also noted the silver lining for states where the economy is based on energy, such as North Dakota and Wyoming. Alaska is making so much money from oil that it announced an estimated surplus next year of US$8 billion, almost twice the state's annual budget.

In North Dakota, revenue is above legislative predictions by 13 per cent, and in Louisiana, the oil and gas sector is robust.

"For energy-producing states, the fiscal situation is strong and the outlook is good," the report said.

Among other findings