Don’t look now, but there’s a nasty pool of red ink spreading beneath the state’s budget.  If New York State tax collections for the first quarter of fiscal 2009-10 are any indication of things to come, Governor Paterson and the state Legislature need to start cutting right away.

Net personal income tax (PIT) collections in the April-June period were down over 31 percent from the previous year, according to the state Department of Taxation and Finance (T&F).  This is considerably worse than the 27 percent drop in PIT revenues projected in the financial plan.

Sales and use taxes were even further off: the T&F data show a drop of 8.9 percent for the quarter, while the financial plan had projected a 2.5 percent increase over last year.

A caveat: financial plan numbers are not precisely comparable to what T&F would call “collections basis” numbers.  But the trend divergence is very wide and serious.  On an apples-to-apples basis, taxes in the first quarter were $433 million below projections–which would translate into a $1.7 billion deficit if replicated across the next three quarters.  But that might be the best-case scenario, for two reasons.  First, net PIT collections for the quarter were artificially inflated by a onetime positive “offset” of $240 million to reflect the state’s past overpayment of income tax revenue to New York City (whose own PIT is collected by the state).  Second, an unexpected jump of $194 million in bank tax collections probably reflected a change in the accounting treatment of investment losses by bank holding companies.  Bank taxes certainly won’t continue to run 149 percent above last year.

Adjusting for these factors, first-quarter tax collections would have been almost $900 million below plan. If collection trends stay on their current path, this year’s deficit could be over $3 billion.