Slower state revenue growth and a dip in job growth prompted the state Council on Revenues yesterday to again shave its forecast for this fiscal year, the fourth time in the past year the council has downgraded its prediction to reflect the state's economy.

The council estimated that state revenue growth this fiscal year will be 3.9 percent, down from its 4.9 percent forecast in January. The lower projection means the state will have about $50 million less than expected for state programs this fiscal year and it will reduce the amount state lawmakers and Gov. Linda Lingle have for the next fiscal year that begins in July.

The council left its revenue projection for next fiscal year unchanged at 4.1 percent.

Economists on the council acknowledged the potential impact the forecast will have at the state Legislature over the next several weeks as lawmakers draft a supplemental state budget.

"All we care about is getting as close to correct as possible," said Carl Bonham, an economist with the University of Hawai'i-Manoa.

State revenue collections through February are up 3.1 percent over last fiscal year and economists believe it is unlikely that revenue growth will increase enough over the next four months to meet the 4.9 percent forecast from January.

"The chances of realizing that are about zero," said Jack Suyderhoud, a professor of business economics at UH-Manoa.

The state's economy has slowed because of declines in tourism and the housing market along with national factors such as the subprime mortgage lending crisis. An adjustment downward this week in state job growth figures from last year will likely lead to a corresponding drop in personal income.

Economists are predicting that after the state's housing market reaches a trough, which may have already happened, there will be a period of flatness before growth starts again in the early part of the next decade. Military construction may partially offset the performance of the residential housing market, however, and government capital improvement projects also could help the economy regain strength.

State government is still benefiting from healthy budget surpluses, but the Lingle administration and lawmakers already have pared spending because of the slower revenue growth and are preparing for further reductions for next year.

The state House has drafted a $10.7 billion budget with $5.3 billion in general-fund spending, which is less than what Lingle proposed in December. The House also reduced Lingle's request for $1.6 billion in government construction spending next year down to $1.5 billion.

State Sen. Rosalyn Baker, D-5th (W. Maui, S. Maui), chairwoman of the Senate Ways and Means Committee, said the council's forecast may mean that the Senate's draft drops below the House version. She said departments that rely more on the general fund — rather than special fund or federal money — will likely feel the pinch.

Nonprofits and other groups that depend on state grants-in-aid also might feel an impact. The Lingle administration has been holding back many grants-in-aid approved for this fiscal year, along with asking departments to pull back on expenses.

But Baker said the Senate will likely be more aggressive than the House on construction spending that might help the economy. She also said the Senate wants the House to seriously consider a streamlined sales tax proposal to help capture some of the local tax money that is due on Internet purchases.

"It's in these kinds of times that you really need to shore up your infrastructure and invest in that infrastructure. And the best way to do that is with capital improvement funds," Baker said. "I think we are going to try to be as aggressive as appropriate."

The construction spending will focus on repair and maintenance projects at UH and at K-12 public schools, along with the modernization of state harbors.

State Rep. Marcus Oshiro, D-39th (Wahiawa), chairman of the House Finance Committee, said lawmakers will likely fulfill those repair and maintenance commitments but said general-fund spending reductions are inevitable. He also said the lower forecast makes it more difficult, but does not rule out, state land preservation purchases of Turtle Bay Resort on the North Shore or Galbraith Estate land in Central O'ahu.

"It's time for making tough choices. You can't have it all," Oshiro said, referring to a comment Lingle made at her State of the State speech in 2006, when the state's surplus was approaching a record. "We're going to have to tighten our belts and maybe lower some expectations."

Georgina Kawamura, the state's budget director, said the administration was still reviewing the revenue growth projections. She plans to brief lawmakers later this week.

The state had a $493.4 million budget surplus at the end of last fiscal year and had been estimating a $475.4 million surplus by the end of this fiscal year, although that number has fallen with the council's lower forecasts.

"We'll be fine, but that doesn't mean you're not still cautious," Kawamura said. "You can't be flippant just because we have the money to appropriate because we have to be concerned with the next year and the two years after that."

Reach Derrick DePledge at ddepledge@honoluluadvertiser.com.