HONOLULU -- Economists with the Hawaii Council on Revenues on Thursday projected an additional $98 million to the state budget shortfall raising it to more than $800 million.

The group of economists attributed the 1.5 percent drop in tax revenues to uncertainty in the tourism industry. Officials said they are concerned that a predicted resurgence of the H1N1 flu in the fall could scare off travelers. The West Coast is one of the biggest markets for Hawaii tourism and officials said the continued problems with California's weak economy could further hurt the flow of visitors.

Earlier, the council had predicted no growth at 0 percent for the remainder of the fiscal year.

Other factors in the decision to lower revenue expectations included consumers not spending, low home sales and a quiet construction industry.

The governor and the lawmakers can only spend what the Council on Revenues forecasts will be collected in tax revenues. New projections from the council increase the state's budget deficit from an expected $786 million to well over $800 million through June 30, 2011.

"The fact that the Council on Revenues has lowered its revenue projection for the seventh time since March 2008 is another reminder that we simply cannot afford to operate state government at the current level of spending," Gov. Linda Lingle said in a written statement.

"This is very serious, but not unexpected. We did expect that the trend was for a further slide and we are still in a recession," Rep. Marcus Oshiro, who heads the House Finance Committee.

State lawmakers were somewhat encouraged that the revenue forecast picks up the following fiscal year.

There could be light at the end of the tunnel. The council forecasted a 6.5 percent increase in revenues for fiscal year 2011, starting in July 2010. That would equal to about $250 million more for the state's budget.

The latest predictions are expected to impact the negotiations between the state and public worker unions. The state proposed furloughs for workers, up to three days a month.

The new projection bodes poorly for public employee negotiations because the debt is larger, House Speaker Calvin Say said. He said he hopes the negotiations will wrap up by the end of September.

"Today's council's projections, I would say, really hurt their side of the bargaining because now you have another minus 1.5 (percent) to address," Say said.

He said he hopes the mayors will get onboard with the governor's plan.

"To close the remaining budget shortfall, we will need to reduce the State’s labor costs, which comprise 70 percent of our operating budget. I remain hopeful we will be able to reach an agreement with the public sector unions that minimizes the impact on public services," Lingle said.

Due to the serious financial situation, Say said that everything is on the table next year including raising the general excise tax, gambling and all other taxes as potential options.

Sen. Donna Kim, who chairs the Senate Ways and Means Committee, said she strongly opposes raising the GET. She said she believes it will hurt the economy further wants to look at trimming the government.