Tax forecasters estimate North Carolina will collect about 2 percent less revenue than first predicted this year.
The Legislature and budget office experts say the state will take in $391 million less than expected to pay for the $19 billion budget for the year ending June 30. Gov. Beverly Perdue has held back money to narrow the shortfall.
A memo dated Monday also says the state will receive $788 million less than expected for the budget for the new year starting July 1.
The estimates could change after April 15 collections are counted.
Legislative leaders say they may have to find up to $1.2 billion in spending cuts, additional revenues or both when new Medicaid expenses and other needs are included.
(Copyright 2010 by The Associated Press. All Rights Reserved.)