PHOENIX (AP) -- Amid worsening assessments from Arizona economists, the legislative budget staff reported Friday that tax collections continued to drop in June as the state finished a fiscal year hit hard by the economic downturn.

Preliminary figures indicate state revenue in June - the final month of the 2007-2008 fiscal year -- was $78 million below the already reduced expectations for the month, the Joint Legislative Budget Committee staff reported.

June sales tax collections were down 6.9 percent from June 2007 while individual income tax collections were down 3.5 million from a year earlier as June 2008 became the eighth straight month to produce less revenue than the corresponding months a year earlier.

A midyear economic analysis released by Arizona State University said a consensus of assessments from government and private economists painted a dimmer picture than previously.

The Arizona Blue Chip Economic Forecast for July has drops in employment, retail sales, housing and population growth from levels projected a month ago.

"The forecasts made at the start of the year are in the shredder. Economy watchers are debating just how bad the downtown will be and how long it will last," wrote Lee McPheters, senior associate dean of the W.P. Carey School of Business.

There was a measure of good news in the budget staff's monthly report: state agencies apparently trimmed their spending as the fiscal year ended, leaving more dollars left unspent than anticipated.

Preliminary figures indicate that so-called "revertments" will total $189 million, or $104 million above the targeted amount, the report said. The biggest savings were recorded in education and health care.

That means less money than expected will need to be withdrawn from the state's rainy fund to balance the 2007-2008 fiscal's books, so more dollars in that account will be available as a reserve in the current fiscal year.

The state's revenue crunch forced the Legislature to reduce the 2007-2008 fiscal year's budget to $10.2 billion from $10.6 billion in April.

The current state budget, approved in late June, totals $9.9 billion, well below the $11 billion or so that the state otherwise would have been on track to spend.

Steps taken by lawmakers to balance both budgets included withdrawals from the rainy day fund, cutting spending, borrowing for school constructions, sweeps of dollars from special-purpose funds, shifting some costs to local governments and delaying some spending into the following fiscal year.

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On the Net:

Budget staff's monthly report: http://www.azleg.gov/jlbc/mfh-jul-08.pdf

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