The state Council on Revenues today substantially lowered growth projections for this fiscal year, which will force the Lingle administration to slash an additional $125 million in state spending before the end of June.

The council projected a 3.0 percent decline in state revenues, down from a 0.5% decline, which translates to about a $125 million loss for the state.

For fiscal year 2010, the council forecast 1.0 percent revenue growth, down from 3.5 percent, another potential $125 million loss for the state.

The new projections will shape the debate over state spending during the upcoming legislative session, as Gov. Linda Lingle and state lawmakers work on a two-year budget plan.

Immediately, however, the state must determine how to close the budget gap this fiscal year.

Lingle has already proposed taking $40 million from the state's rainy day fund in addition to the across-the-board department cuts and restrictions on travel and new hiring. Now, the administration must find another $125 million.

Paul Brewbaker, the council's chairman and an economist for Bank of Hawaii, cautioned lawmakers to err on the downside of the forecast as the economy continues to struggle.

The governor and lawmakers are required by law to use the council's projections as a guide when drafting the budget. The council is scheduled to update its forecast again in March.