To survive this fiscal year, states overall cut more from their budgets than they have in about a quarter-century. To get through next year, a record number of governors want to shrink their budgets.

A new report yesterday on state governments' fiscal health found widespread pain and scant signs of improvement. Broad program cuts are in place, governors have proposed $17.5 billion in new taxes and fees and dangerously low savings are on hand if next year turns out grim, too.

"The news is pretty bad, and I think it's going to get a little worse," said Ray Scheppach, executive director of the National Governors Association, which released the study with the National Association of State Budget Officers.

Their report relies on data collected this spring, as governors and legislators began budget talks for the new fiscal year that begins for all but four states in July.

The report found:

States cut $14.5 billion to cover shortfalls for the fiscal year that ends next week, the largest correction in the 27 years that governors and budget officers have tracked state finances.

State spending overall grew by 0.3 percent in the current fiscal year, and, based on governors' proposals, was estimated to fall by 0.1 percent next year.

A record number of 19 states began next year's budget deliberations proposing to shrink spending.

Scheppach and Scott Pattison, head of the budget officers' group, said the problems were caused by a sharp and sustained drop in state revenues, combined with high costs for Medicaid.

With 28 states ordering across-the-board cuts to government services this year, and tax revenue still too weak to really help, "we're in the situation now where Medicaid is competing with education," Scheppach said.

Besides cutting programs, 29 governors turned to new taxes and fees to find a way past the fiscal challenges. Governors proposed at least $17.5 billion in higher taxes or fees next year, the biggest proposed increase since 1979.

The report doesn't detail how much in new taxes and fees actually won approval or remains under consideration, as some states have not finished their budget deliberations and legislative work.

An Associated Press analysis found that, as of the second week of June, states already had approved $4.3 billion in taxes and $2.3 billion in fees, and an additional $16.4 billion in new or higher taxes and fees were still being considered.

The new report also warned that the use of reserves, or so-called "rainy day" funds, had left the states significantly less able to cushion any additional economic blows.

Reserve balances overall are currently at $6.4 billion, or 1.3 percent of expenditures. In 2000, at the peak of the economic boom, reserves were at $48.8 billion, or 10.4 percent of expenditures.

Scheppach and Pattison dismissed criticisms that state leaders failed to respond to the downturn or spent their states into their current problems, noting that states approved significant tax cuts and built up healthy savings when the economy was booming in the 1990s. They said spending then did not grow faster than average.