Budget blues.

• Position: TRENDS AND TRANSITIONS

The nation's deteriorating economy is clearly taking a to]] on the states, but the full extent of the damage may not be known for months.

States are reporting slowing revenue collection from sales taxes, and declining income from capital gains, dividends and stock. Recent financial developments are likely to hurt corporate tax collections, and even states that have benefited from robust energy prices are beginning to see revenue fall along with the price of oil.

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"States have been confronted with bad economic circumstances in the past, but never so many states, all at once," says William T. Pound, executive director of the National Conference of State Legislatures.

Several states are reporting threats to the health of the employee pension system. In a story on the stateline.org website, state officials who manage the funds say they are facing difficult choices, including postponing cost-of-living increases, increasing employer contributions or relying on more taxpayer dollars to make up for the losses.

So far, the problems states are facing have been reported in the media in piecemeal fashion. Among them:

* California had a long public argument over how to close its $15.2 billion deficit as it entered the fiscal year. Only weeks after the budget was settled, the state's...