PROVIDENCE — State revenue collections lagged expectations by as much as $33.1 million during the quarter that ended on Sept. 30, compounding a growing financial problem for the state in a budget year that began with an unprecedented deficit.

Between the revenue decline and the leftover deficit from last year, the state is now operating with a potential $66.8-million shortfall only three months into its new budget year, amid deep concern that both the state and national economy may not have bottomed out yet.

In a series of interviews yesterday, state officials from the governor to the House Finance chairman to the chief lobbyist for the AFL-CIO sounded varying degrees of concern and alarm about the downturn, what it says about the state of the state and what it portends for the people who either work for the state or receive services from it.

“It was tough to start out with, and this is going to make it more difficult,” said Republican Governor Carcieri, during a brief impromptu interview at the State House yesterday.

“It’s the trend that’s alarming,” said Rep. Steven Costantino, Democratic chairman of the House Finance Committee. “I think we are just seeing the tip of the iceberg as it relates to the country and the cycle we are in.”

“Look at the income numbers,” he said. “This is definitely linked to the lack of jobs. We’re net down on jobs…. You don’t have to be a rocket scientist. You know. It’s just that this puts a little more reality into it.”

Added Gary Sasse, the Carcieri administration’s director of revenue: “It’s going to call for tough choices and it’s going to really call for a reevaluation of what government can afford to do.”

“Obviously, very worried,” said AFL-CIO secretary treasurer George Nee. “This is obviously bad news for the state of Rhode Island. It’s bad news for the people who depend on the services and work for the state… We were hoping that after the struggles and sacrifices that we went through [during the last legislative session], we would start to have a little clear sailing. Unfortunately, the federal economy doesn’t seem to be working in our direction.”

Prompting their comments was the release yesterday by the House Fiscal Advisory staff of a report on state revenue collections during the first three months of the budget year that began July 1. The state Department of Revenue is planning to release its own report today, and while the estimated shortfall is not as large, at “$25-26 million” because of the way Lottery receipts and future reimbursements for historic tax credits are counted, Sasse said that both reports highlight Rhode Island’s precarious position in “very unsettled economic times.”

Among the key findings of the House fiscal report: Overall revenue collections during the quarter were $33.1 million below the estimates on which this year’s $6.9-billion state budget were based.

“This should be cause for concern,” the report said. “The preliminary closing for FY 2008 indicates a $33.7 million starting FY 2009 deficit, which combined with revenues through the first quarter, appears to indicate a difficult coming budget.”

The state derives its revenues from taxes and a myriad of other sources, including federal aid, licensing fees and departmental revenues which include the state Lottery. And some were up, including cigarette tax collections, which the state’s chief revenue analyst Paul Dion attributes to a hike this past summer in neighboring Massachusetts, where the cigarette tax is now $2.51, compared with $2.46 in Rhode Island. Dion pegged the average price of a brand-name pack of cigarettes at $7.09 there, $6.10 here. He believes the disparity in tax rates, minimum markups and price accounts for the $1 million-over-estimate surge here. Alcohol taxes were also up.

But alcohol and cigarettes are small pieces in the state revenue pie. Sales and income taxes are the big revenue producers. They also “generally reflect current economic activity,” and both were down. Personal income tax receipts were off by $16.6 million, “with particular weakness in estimated payments.”

Sales-tax collections not only trailed expectations for this year, they ran a total of 2.8 percent behind the first quarter of last year. That includes an 18.4-percent drop in sales taxes on new cars paid at the registry.

Another “potential harbinger of bad times” is the state’s insurance tax receipts, which came $1.7 million below estimates, but this particular dropoff was attributed to a single, unnamed company taking “a long-standing refund,” instead of carrying the overpayment forward from year to year.

“There are generally refunds carried forward by business entities from year to year to offset future liability. It may be that the tightening economy may lead to additional refunds being taken,” the report says.

The third largest source of state revenue, the Lottery, also trailed estimates by $2.3 million for July and August, “consisting of lags of $1.4 million for games and Keno and $0.9 million for VLTs.”

The official state revenue estimating conference — which meets twice a year to assess how the state is faring financially — begins its next run of meetings on Oct. 22, with economists giving their forecasts of where Rhode Island stands and where it is heading. “It’s very serious and we need to do some more cutting and some more belt-tightening,” said Senate President Joseph Montalbano yesterday.

After the Nov. 4 elections — and the revenue estimating conference — Costantino said his committee would likely start holding hearings on what each state department is doing to live within the state’s reduced means. “This is a very, very grim revenue report,” he said.

The state has already started to retrench.

The Division of Motor Vehicles has already rescheduled appointments for more than 300 drivers’ exams because there were not enough examiners to conduct the tests, and now it is cutting hours. Beginning Oct. 14, the DMV’s Woonsocket branch will be closed on Mondays, the Warren branch will be closed on Wednesdays and the West Warwick branch will be closed on Fridays, and driver’s tests will only be given at the Pawtucket and Middletown branches.

Sasse said it has been increasingly evident the state will have to look beyond the employee-benefits and Medicaid-spending cutbacks to local aid and making “the kinds of issues that the state has been addressing in improving efficiency and productivity translate down to the local level.” The current-year budget allots $232.8 million in non-school aid, and another $924.4 million in state aid for schools, including the state’s share of local school construction and teacher-retirement costs.

kgregg@projo.com