Michigan is perhaps in worst shape overall. It will spend about 6 percent less this year than last, and has cut state employment by about 4,300 jobs.

Minnesota faces a $500 million revenue shortage in the upcoming biennium.

Iowa cut its fiscal 1981 budget by 4.6 percent, and may be forced to raise taxes to stay even in 1982.

Ohio temporarily raised sales and income taxes this year to weather its crisis.

Wisconsin has made sizable spending cuts.

Missouri cut its budget 10 percent in January, and expects no increase next year.

From Oregon to Connecticut and from Michigan to Alabama, the state governments are undergoing a fiscal retreat brought on by the national tax revolt and the sluggish U.S. economy.

State legislatures have been forced to slash spending, in some cases across the board, and, for the first time since Proposition 13 fever swept the country three years ago, higher state taxes are becoming commonplace.

The headlines have gone in recent weeks to President Reagan's budget cuts at the federal level, but these pale by comparison with the cuts already going on across the country in states and localities.

And the federal cuts, which will hit the states in fiscal 1982, will make matters even worse, causing further spending cuts and more tax increases.

Any expectation that the states will take over responsibilities now being jettisoned in Washington is belied by the weak fiscal condition of many state governments. The only hope is that Reagan's economic program will produce the kind of results he so confidently predicts.

The fiscal wreckage can be found all across the country, although many midwestern states appear hardest hit because of the depression in the automobile industry.

Connecticut faces a $110 million revenue shortage in fiscal 1982. Some state agencies in Alabama have been told they will receive less money this year than called in the budget approved by the legislature.

Kentucky has gone through repeated rounds of cuts. Illinois Gov. James R. Thompson recently proposed $220 million in cuts from the 1982 budget he proposed in March.

Closer to home, only Virginia seems healthy, while Maryland and the District of Columbia continue to suffer from a shortage of revenue that may cause program cuts or layoffs.

And in Massachusetts, where voters approved a drastic property tax limitation measure last November, politicians are bracing for a struggle over how to slice up a smaller pie.

The issue there is how much the state should attempt to help out towns and cities whose revenues will be cut drastically by Proposition 2 1/2. Other states which have done that, or have provided their own property tax relief, now find themselves in financial trouble.

"It's partly self-inflicted," Robert Smith, Oregon's chief budget officer, said of the problems in his state, where efforts to subsidize property tax payments have diverted money from other programs.

Many states might have been able to get through the tax revolt with only a little belt-tightening had it not been for the recession. "The states have been hit by a double whammy," said Jim Mallory, deputy director of the National Association of State Budget Officers.

In many states, the only choices are deep reductions, higher taxes or both.

In Oregon, a state hurt not only by the tax revolt but also by a slump in the timber industry, Republican Gov. Victor Atiyeh has proposed a package of cuts totaling $260 million, along with new taxes of $240 million.

In Minnesota, where Gov. Al Quie came into office with a pledge to cut taxes, voters face a reduction in services and about $400 million in new taxes. Legislators worked on a solution all last week, and quie is fighting to prevent erosion of his tax centerpiece, indexation.

Indexation is an attempt to insulate taxpayers from the effects of inflation, but a number of states that have tried it now find themselves in financial trouble.

State politicians elsewhere are doing all they can to head off even more drastic cuts, and are dipping into reserve funds at an unprecedented rate.

State governments expect to spend about $6 billion more than they get in revenues in the current fiscal year, according to a forthcoming study by the National Governors Association (NGA).This will cut sharply into the balances states maintain because of restrictions on deficits. Only one state, Vermont, allows deficits.

Most states try to achieve a year-end balance 5 to 6 percent of expenditures. For fiscal 1981, the average will be well below 4 percent, down from 9 percent in fiscal 1980, according to NGA estimates.

Those averages also mask a disparity between the few healthy states and the many that are suffering. Energyrich states like Alaska, Texas, Louisiana and Montana, whose revenues have been swollen by higher oil prices and various severance taxes, are financially healthy. But for most other states, financial conditions have tightened since last year, and are expected to become worse in fiscal 1982.

"A good number of states are at zero or 1 percent [in their balances]," said Joe McLaughlin of the NGA. "They're cutting it very thin."

At least 33 states project year-end balances of below 5 percent, compared with 20 a year ago, according to preliminary findings by the NGA. Projects for fiscal 1982 show that year-end balances may fall to the range of 2 percent.

Nothing appears sacred when the state budget ax begins to fall. In Minnesota, the budget crisis and a decision not to sell construction bonds until interest rates drop may eliminate funding for a new building to house the Hubert H. Humphery Institute of Public Affairs.

In Michigan, Thomas A. Clay, director of the state budget office, said, "There hasn't been an important area of our budget that hasn't been cut . . . . We're retrenching rather dramatically."

Among the programs hardest hit is Medicaid. State costs have risen 84 percent since 1977 to an estimated $14.2 billion in fiscal 1982. Reagan wants to cap further federal increases at 5 percent, and at their winter meeting in February, the governors protested that they could not take up the slack.

Many states have cut benefits and tightened eligibility standards. Kentucky, for example, is considering changes that would eliminate 57,000 people from the program . Benefits in Washington state will be cut from $458 to $416 for a family of three.

Minnesota and Georgia, among others, are considering charging Medicaid patients nominal sums to slow the growth of the program. Other states may limit the amount they pay doctors for treating Medicaid patients.

Budgets for elementary and secondary schools have been squeezed, a particular problem because state government is now the primary funding source for the schools.

Kentucky's reductions have affected school supplies, new textbooks, teacher-pupil ratios in kindergarten classes and various support services. Washington's legislature put a lid on teacher salaries, Iowa teachers face layoffs and Missouri teachers protest that the new budget will force them to lose futher to inflation.

To prevent deeper cuts in higher education, college tuitions are rising. Students in Washington state face increases of 70 percent, while a 25 percent hike in Nevada is likely.

Other programs, from parks to police, have been slashed by legislatures with their backs to the wall. Idaho, whose budget is slightly larger this year than last, has closed parks to hold down costs.

The financial squeeze has made higher taxes a necessity in some states. "You can cut the budget just so far," said J. William Burns, deputy secretary of the Office of Policy Management in Connecticut, where a host of tax increases is likely."We're in the business of delivering services. You can't eliminate snowplowing. You've got to keep the schools open."

The Tax Foundation estimates that legislation proposed this year by the nation's governors would raise state taxes by $3 billion, continuing a trend begun last year, when tax increases outpaced tax cuts for the first time since 1978, the year California voters approved Proposition 13.

Between 1977 and 1980, 18 states enacted tax or spending limits, 36 states cut their income taxes, 22 states slashed sales taxes and 9 states indexed their tax systems. But those tax cuts have since come home to roost.

The National Conference of State Legislatures, using Census Bureau figures, reports that tax revenues increased faster than inflation in nine states in fiscal 1980, all but one in the West and South. State tax receipts rose 9.6 percent. In Vermont and Michigan, tax revenues declined.

As a result, state governments have been forced to raise taxes. In 1980, 18 states enacted 29 tax increases, including seven states that boosted either sales or income taxes, according to the NGA.

Even more states are considering tax increases this year, and the mood of the legislatures is best symbolized by a non-binding straw vote last month in the House of Representatives in notoiously anti-tax New Hampshire. By 2 to 1, members of the House there said they would favor enacting the state's first income tax.

Most states are trying to avoid higher sales or income taxes because of the political consequences. "The one that separates the men from the boys is to go after income or sales taxes," said John Shannon of the Advisory Commission on Intergovernmental Relations.

But many states are raising less visible taxes, such as those on cigarettes or alcohol, or increasing user fees, to bring more revenue. And higher gasoline taxes are being considered in nearly two dozen states to shore up highway maintenance funds.

Still, the tax revolt has not completely died down. Michigan's Republican Gov. William G. Milliken is supporting a ballot proposition to cut taxes on homes by 50 percent, while raising the sales tax from 4 to 5.5 percent and cutting state spending an additional $250 million. He is trying to head off a more drastic tax cut plan favored by conservatives.

In Nevada, Gov. Robert F. List signed legislation that cut property taxes by 50 percent but boosted the sales tax from 3.5 to 5.75 percent.

Public attitudes may change, however, because those state surpluses are disappearing, and local voters will have to decide if they are willing to live with fewer police, parks and teachers, or raise local taxes.

This tax revolt has already had a profound effect on the role of state and local governments, whose share of the gross national product has declined from a peak of 15.1 percent in 1975 to 13.5 percent in 1980.

And when Reagan finishes his work on the federal budget, the effect on the states will be nearly as dramatic. In fiscal 1980, federal aid for the states accounted for 31.7 percent of state-local receipts. By fiscal 1982, that will decline to 24.3 percent, according to the Advisory Commission on Intergovernmental Relations.

Steven Gold of the National Conference of State Legislatures said, "That is the next body blow that's going to hit the states."