Associated Press WriterJEFFERSON CITY, Mo. (AP) -- Missouri government is facing as much as a $250 million shortfall in the next two months due largely to lower than expected state income tax collections, state officials said Thursday.

Individual income tax revenues, which usually spike after the April 15 filing deadline, are running behind because of large losses last year in the stock market.

The shortfall means Missouri may not have enough money to pay its bills through the June 30 end of the fiscal year.

Holden called managing the state budget "one of the most difficult challenges I have seen in more than two decades of public service."

"We must resolve this situation quickly and effectively," he said. "The Missouri constitution requires a balanced budget."

To get one, Holden proposed that the state spend some of its reserve fund, and some of its settlement with tobacco companies. He also proposed additional withholdings from state agency expense and equipment budgets and a transfer of money from the state facilities management reserve fund -- an emergency fund for state buildings.

"Unfortunately, once again, the revenue deterioration stemming from the unsettled state of the national economy and, to some extent, economic disruptions from Sept. 11, demands we take immediate action," he said.

The state is operating on a $19 billion budget passed last year on the expectation of a 5.6 percent growth in the state's general tax revenues.

That projection has twice been revised downward. In December, economic forecasters projected the state would end its 2002 fiscal year with a 0.6 percent decline over the previous year in state tax revenues.

Based on Thursday's financial update, Missouri's tax revenues now are projected to fall at least 3.7 percent below last year. Forecasters said the decline could be as great as 4.4 percent if businesses take advantage of new tax write-offs under a federal economic stimulus package.

Holden already has withheld about $600 million from agencies this year because of lower-than-expected state revenues.

The latest revenue troubles come as the Legislature is working on its budget for the 2003 fiscal, which begins July 1.

Legislative budget writers said they were disheartened by the news.

"It is of crisis proportions because the numbers keep piling up," said Sen. John Russell, R-Lebanon, chairman of the Senate Appropriations Committee.

Rep. Tim Green, chairman of the House Budget Committee, was nearly speechless after being briefed about the situation.

"I characterize this as a tragedy," said Green, D-St. Louis. "I mean there are people that depend on these service all the way from education to social services. It's happening throughout the country as well, it's nothing new."

Nationwide, there are 33 states where revenues have failed to meet estimates, according to the National Conference of State Legislatures. But that report, released in March, showed Missouri's revenue projections to be on target.

All told, budget deficits nationwide are running at about $27 billion, according to NCSL.

Some states have used their budget reserves to cover shortfalls while others, like neighboring Kansas, are considering a tax increase.

In Massachusetts, the budget shortfall has reached $800 million while Wisconsin's deficit is more than $1 billion.

"We haven't seen such a widespread problem with state finances since 1991," said Arturo Perez, an NCSL budget analyst.

In Missouri, the revenue report released Thursday said capital gains income taxes appear to be between 50 percent and 70 percent below last year's levels.

December's revised revenue projection had figured on a 20 percent reduction in capital gains taxes -- the same percentage reduction predicted by the U.S. Congressional Budget Office.