State tax collections fell 9.7 percent during the first three months of the fiscal year, the state Department of Taxation reported yesterday, a more significant drop than economists predicted.

The state Council on Revenues has estimated a 1.5 percent decline for the fiscal year that ends next June. While there is time for a recovery, the state is in a deep hole after the first quarter.

Economists believe tax collections will rebound. But the decline in actual revenue collections through September could prompt Gov. Linda Lingle and state lawmakers to consider further budget cuts, such as additional layoffs, or new revenue-generating ideas, such as the use of special funds like the state's hurricane relief fund or an increase in the general excise tax, next session.

The Lingle administration has estimated a $1 billion budget deficit through June 2011. The administration has yet to calculate exactly how much the state will save from the furloughs agreed to by the Hawaii State Teachers Association and, in principle, by the Hawaii Government Employees Association.

The University of Hawai'i Professional Assembly rejected the university's final contract offer yesterday that included a 5 percent pay cut, while the United Public Workers and the Lingle administration are still in negotiations, so the full savings from reduced labor costs could be unknown for several more weeks.

Lingle told reporters yesterday that she remains opposed to a general-excise tax increase. The governor, who ordered more than 1,100 layoffs of state workers starting in November, also said she could not promise that there will be no further layoffs.

"I think raising the excise tax now would inhibit our ability to recover from this weak economy. It would put more businesses out of business, which means we would then collect less in taxes," she said.

Lingle said state lawmakers already raised the income tax, the hotel-room tax, the conveyance tax and tobacco taxes last session to help capture additional revenue.

The governor cited the lower tax collections announced yesterday as a reason she is unable to guarantee no further layoffs. "So there can't be those kinds of promises because we're required to have a balanced budget," she said.

"If revenues drop, just as in a business or in your home, we'll simply have to cut our expenses. We have no choice."

State Senate President Colleen Hanabusa, D-21st (Nanakuli, Makaha), said lawmakers want to see a few more months of figures to determine whether the fiscal year will be worse than expected. The council is scheduled to update its revenue forecast in January.

Some lawmakers, including state Senate Majority Leader Gary Hooser, D-7th (Kaua'i, Ni'ihau), have said lawmakers should return in special session now and tap the hurricane relief fund so teachers do not have to take furloughs on classroom instruction days. Others have said they would support a general-excise tax increase.

But Hanabusa, and state House leaders, said there are no plans for a special session on the budget.

Hanabusa said lawmakers do not want to react to monthly fluctuations in tax collections but rather wait until there is a clear trend. "You would expect these ups-and-downs during these difficult economic times. We'd have to watch for at least a couple more months to see a trend going back up or if we're flat," she said. "We're not going to make a miraculous recovery."

The state Department of Taxation put the total general fund revenue decline for the first quarter at 9.7 percent compared to last year. General excise and use taxes are down 11.8 percent. Hotel room taxes are off 11.9 percent. Individual income taxes are down 6.7 percent. Corporate income taxes are down 27.3 percent.