INDIANAPOLIS — A new state revenue forecast predicts that Indiana will take in about $1.1 billion less in taxes through June 2011 than predicted in a more-optimistic estimate made just last month.

The estimates released Wednesday show the state collecting less revenue in 2009 than 2008. But the May forecast predicts slight growth in fiscal year 2010 and growth of nearly 4 percent from 2010 to 2011.

The new outlook — much gloomier than April's predictions — could make it more difficult for lawmakers to hammer out an agreement on a new state budget before the current spending plan expires June 30.

The new forecast, put together by a bipartisan group of fiscal analysts, may be more in line with what Republican Gov. Mitch Daniels considers the real state of Indiana's economic future. It included new variables that analysts said were better in tune with Indiana's patterns of tax receipts.

“Obviously a critical first step towards building a good budget is a reasonable, realistic revenue forecast, and we believe we have that at this point,” said Chris Ruhl, Daniels' budget director.

The Daniels administration is scheduled to present a new proposed budget June 2, and lawmakers could use that as a starting point in what will surely be difficult negotiations.

Legislative leaders put together a budget in the regular legislative session that was based on the brighter April forecast — but lawmakers couldn't even agree on that. The bill passed the GOP-led Senate but didn't clear the Democrat-controlled House, where Democrats said it spent too little and Republicans said it spent too much.

Lawmakers would have to slash about $1.1 billion from that budget bill if they want to keep state reserves at current levels.

Daniels said lawmakers' April attempt at a budget ignored the “reality” of Indiana's finances and that he would have vetoed it had it passed. He said last month's forecast was too rosy, even though it predicted tax collections to be $830 million less than a December forecast.

The administration has said the governor's new budget proposal will likely include deeper cuts than ones in the lean budget Daniels proposed earlier this year.

Senate Appropriations Chairman Luke Kenley, R-Noblesville, said the state can avoid cutting key services while keeping its reserves of more than $1 billion if lawmakers keep spending relatively flat in the budget. “We sort of have a manageable problem here,” Kenley said.

But Democrats questioned the May forecast and said cuts and flat funding may not be necessary.

“This is a great forecast for all the people that wanted to take a meat ax to education and job creation efforts,” said Rep. Scott Pelath, D-Michigan City. “Certainly if you do the forecast enough times, you end up getting the answer that you want.”

Pelath said Democrats don't want to gut education funding while keeping reserves sitting in the bank.

Daniels has not yet announced when the special legislative session will begin, but legislative leaders are hoping to be called in around June 15. If lawmakers can't agree on a new budget, the Legislative Services Agency says that most of state government would shut down unless legislation is passed to continue spending at current levels.