WASHINGTON -- States face more tough times balancing their budgets in a sluggish economy despite large tax increases and spending restraints on many programs in the last two years, according to a report issued yesterday by the the National Governors' Association.

"The message is states are still under phenomenal fiscal pressure for the third year in a row," said Raymond C. Scheppach, the association's executive director. "If the economy doesn't recover, I think we're going to see more cuts in services."

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