Washington (CNN) - Although the national economy has reported growth, revenues at the state level continue to deteriorate, and state economies have not seen the worst yet, the governors' association said Saturday.
The National Governors Association released a report Saturday on states' fiscal situation, as the group's conference in Washington began.
"States foresee fiscal year 2011, which starts for most states July 1, 2010, to be the most difficult to date, and few see fiscal year 2012 much better," the report said.
"Unlike the national economy, which witnessed significant growth in the fourth quarter of 2009 ... state fiscal conditions have continued to worsen."
States face combined remaining budget gaps of $134 billion over the next three years, the report said.
It said there has been no leveling of state revenues and most states are seeing monthly totals that are lower than recent forecasts.
Citing the Rockefeller Institute of Government, the report said that state tax collections have declined for four consecutive quarters, beginning in 2009's third quarter.
Meanwhile, Medicaid costs have grown, the report said. And states continue to lose jobs. In January alone, states eliminated 18,000 jobs, and will continue to shed jobs, the report said.
Because states are required to balance their budgets, they will "continue to cut spending and increase taxes, which will also weaken the economy and, thus, its ability to generate private sector jobs," it said.
Governors said the deficits are forcing them to make tough decisions. "Almost all governors ... are facing budget deficits," Minnesota Gov. Tim Pawlenty said.
"The key to all of this is to get the economy moving and get jobs growing again. That's where we need to have our focus."