The financial picture of states coast to coast continues to be bleak, according to a new report from the National Governors Association and the National Association of State Budget Officers. As of midyear, the states have reported cuts of $14.5 billion as they deal with the most serious budget situation in half a century, and 50 percent of the nation's governors plan to reduce state spending next year.

As the states head into what is expected to be the third year of slowing revenues and heavier demands on spending, the report attests, budget-balancing is achieved through a combination of borrowing, spending cuts, and tax and fee increases.

NGA Executive Director Raymond Scheppach contends that times are expected to be tough for states for a few more months, with some gain in state revenues anticipated for late summer next year. At a Washington news conference, he added that the worst of the current downturn may still be five months off.