State sales and income tax revenue took a nosedive in the third quarter of fiscal 2008 and will likely worsen during the first half of 2009, possibly threatening states' ratings and forcing them to issue more short-term debt, warned a report issued Friday by the Nelson A. Rockefeller Institute of Government.

Local governments maintained relatively stable tax revenue toward the end of fiscal 2008 partly due to their heavy reliance on property taxes, the report said. But those localities are seeing a downward trend in their tax collections.

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