State general fund tax collections showed a slight improvement last month, although they are still well below what economists had predicted for the fiscal year.

During the first five months of the fiscal year, state general fund revenues were $121 million, or 6.5 percent, less than revenues for the same period of the 2008-2009 fiscal year, the state Department of Taxation said yesterday in its preliminary revenue collection report.

However, the 6.5 percent drop was an improvement from the 10.9 percent decrease the state reported during the first four months this year and the 9.7 percent drop reported in October.

Despite the improvement, general fund deposits remained below projections made earlier in the year. The state Council on Revenues had forecast a 1.5 percent decline for the 2009-2010 fiscal year.

The fiscal year runs from July 1 through June 30.

The Tax Department said it anticipates the decline in general fund revenues to level off for the remainder of the year.

"We do see some indications that we may be either hitting or starting to hit bottom," said Kurt Kawafuchi, state tax director. "It's a little bit better than the previous months. It's still negative and that's not good. But it's not as steep as the previous month."

Kawafuchi said the Council on Revenues is set to meet on Thursday and will likely issue an updated forecast. He said he wouldn't want to guess what the latest projection could be.

"You can see that their last projection was negative 1.5 percent and year-to-date we're negative 6.5, so if you had to look at it and give your best guess, you could probably guess," Kawafuchi said.

The forecast is crucial because state budget officials and the Legislature are required to use the projection to determine the state general fund budget. Each percentage point decline in revenues means about $42 million more in lost revenues for the state budget, the state said.

Kawafuchi said he's hopeful that revenues will improve as the year goes on.

"There's a feeling by some economists that the first six months of this fiscal year will be worse than the second six months. I'm hopeful that they're right," he said.

In its preliminary report released yesterday, the Tax Department also said that general excise and use taxes, the largest category of collections, decreased by 7.3 percent during the first five months of the year compared with the same period last year. Hotel room taxes dropped by 5.6 percent.

Individual income taxes are down 9.1 percent and corporate income taxes are down 38.5 percent, the department said.