Another somber assessment from the state Council on Revenues has dropped the state budget forecast by $260 million for the 2009-2011 fiscal period.

The cumulative effect, according to state and legislative economists, means the state's budget shortfall has grown to $910 million from $650 million.

The seven-person, semiautonomous council, charged with forecasting state tax revenue, said collections will drop by 5 percent for the remaining four months of this fiscal year. That translates into a drop of $90 million.

“;It is a continuing adjustment to reflect the reality of deterioration,”; said Paul Brewbaker, council chairman. “;We think we are close to seeing the end of it, but we still have to reckon with it.”;

The council then predicted that the next fiscal year will see a 0.5 percent growth rate. Previously it had said the state would collect 1 percent more in taxes.

“;It is not good news, but it could have been worse,”; said Kurt Kawafuchi, state tax director.

The changes mean that the state will have less money for state operations, schools, roads, hospitals and regulation. It could also mean that some state workers could lose their jobs or be paid less.

House Speaker Calvin Say and Senate President Colleen Hanabusa both said the council's prediction was too optimistic. In separate interviews the two said Hawaii's economy is likely to continue to decline.

“;I am looking at calendar year 2010 to be a very dismal picture. I anticipate we will hit rock bottom in the fourth quarter of this year. We are on a spiral downward,”; Say said.

Hanabusa called the council's predictions “;unrealistic.”;

“;I don't know what the council sees is going to be so miraculous to make up the difference from minus 5 percent to plus 0.5 percent,”; Hanabusa said.

Gov. Linda Lingle said she is working “;cooperatively”; with the Legislature to close the budget gap.

But after previously saying she would consider all options, Lingle said she would not raise taxes or cut workers.

“;Either of these actions would further weaken our economy,”; Lingle said in a written statement.

The comments angered Rep. Marcus Oshiro, House Finance Committee chairman, who is recommending both layoffs and tax increases. He said he had been assured by Lingle that she would not take any options off the table.

“;I felt the governor went back on her promise and pledge to work with us. She did that by saying there would be no layoffs and would not consider any tax proposals,”; Oshiro said.

Say added that Lingle's budget proposals do not balance because she insists on figuring in tax savings from bills that the House has already rejected.

“;Her assumptions from last week are way off,”; Say said.

Lingle has insisted that the Legislature could revive the proposals, something almost unheard of if they have already been voted down in committee. Say said Lingle is ignoring the Legislature.