A security guard checks to make sure a door is closed at the Resources Building in Sacramento, Calif., in this February 2009 file photo. A report by the National Conference of State Legislatures released Wednesday shows that many states still face tough budget decisions, but the worst may be behind them.

Denver ? The good news in a report released Wednesday is that, as the nation’s economy slowly starts growing again, state budgets are finally on the mend after taking their worst battering since the Great Depression.

The bad news is that the situation in state capitals is still grim: Even after cutting a combined $84 billion at the start of this fiscal year, 15 states face persistent deficits that must be closed over the next six months.

Meanwhile, 35 states project deficits in the next fiscal year, which begins in July 2011.

Although the halting economic expansion has finally caused tax revenue to rise, states are still wrestling with increasing demand for social services as recession-battered families remain desperate for aid. And the $800 billion federal stimulus — which represented about 5 percent of state budgets last year — is expiring, with nothing to take its place.

“It’s a sort of budget paradox,” said Arturo Perez, an analyst for the National Conference of State Legislatures, which released Wednesday’s report. “Revenues are stabilizing or even growing for the first time in 18 to 24 months. … But they’re not growing fast enough to offset that 5 percent across the board.”

Struggles not over

In Pennsylvania, for example, state lawmakers and outgoing Gov. Edward G. Rendell sliced $3 billion out of the budget over the last couple of years as the recession hit. Tax revenue is starting to grow again, by about 3 percent so far.

But the state expects continuing high demand for Medicaid and other social services, and faces another grim budget cycle with a hole of $4 billion in its $28 billion budget.

“There are going to have to be very, very difficult decisions in the 2011-12 budget,” Rendell spokesman Gary Tuma said.

The state in the worst shape is Illinois, which faces a deficit this year of a staggering 47 percent of its entire budget, about $13 billion. A sense of despair has settled over the state capital of Springfield, where various desperate measures, including a major expansion of gambling, have been kicked around.

Illinois Gov. Pat Quinn, who took over from impeached Gov. Rod R. Blagojevich and won his own term last month, has been pushing for an income tax hike to help close the gap. But there’s widespread skepticism about the viability of that proposal.

“Why on Earth should the taxpayers support a tax increase when elected officials have not demonstrated they are capable of managing Illinois’ finances and creating a proper budget?” a fellow Democrat, state Rep.-elect Michelle Mussman of Schaumburg, responded to a Chicago Tribune questionnaire recently.

In California, which has often been the poster child for budget dysfunction, faces a comparatively mild shortfall, at least as a percentage of its budget. The shortfall is 6.6 percent, but that translates to $6.1 billion.

Decreasing pessimism

In a survey of state budget directors, a majority reported a stable revenue situation, and none said they were pessimistic. In contrast, in November 2009, 13 directors were pessimistic that tax receipts would plunge further.

States tend to lag in economic recoveries, and the picture next year remains ugly. California’s deficit, for example, is projected to rise to $19.3 billion. It’s not in the worst shape — Nevada faces the biggest hole, with a gap of 32 percent of its budget.

Arizona is another perennial budget disaster. Lawmakers have gone to extremes to try to close that state’s persistent budget deficit, selling the state Capitol building and cutting state payments for organ transplants. The latter move is likely to be reversed; some patients died once the transplants were halted.

Arizona has to trim $800 million from its now $8 billion budget this year, and another $1.4 billion next year.

State Rep. John Kavanagh, chairman of the Arizona House of Representatives’ appropriations committee, noted that the state had already racked up big bills by borrowing money to avoid cuts in prior years. It pays about $200 million annually on its debt.

“The stimulus is gone, the economy is only crawling back and we have a lot of debt,” Kavanagh said. “Good times are about five years away, maybe longer for Arizona. … We’re digging in for the long haul.”