The state budget is still a headache, but the shortfall is shrinking.

Instead of a $185 million hole - as projected earlier this year - the Legislature is now looking at an estimated deficit of $90 million for fiscal year 2012.

With one stroke, lawmakers closed the budget gap by nearly $50 million, explained Sen. Steve Vick, R-Dalton Gardens.

When the U.S. Congress extended the so-called Bush tax cuts, it added an element called bonus depreciation, as a means to potentially stimulate the economy.

Bonus depreciation allows businesses to write off the entire cost of an item the first year it's purchased, Vick said. It saves them money in the short run.

"So what we did is we conformed to all of the tax law except that portion of it," Vick said. "We decided it just wasn't a good year to do that."

Without bonus depreciation in the state tax law, purchases can still be written off, but only incrementally year-by-year - based on the individual item.

"The feedback we got from the tax committee was the businesses here didn't think it would make that much of a difference," Vick said.

Most of their taxes are federal, he added, and only a small portion go to the state.

Besides the bonus depreciation issue, there was another major dent in the deficit: Initial projections had included about $40 million worth of wind energy tax credit, Vick said. But the figure was inflated, and the rebates will not be so costly.

"($40 million) ended up not being correct," he said. "It wasn't nearly that much. So that was a big chunk of (the deficit)."

Although the budget shortfall has been nearly halved since January, Sen. Jim Hammond, R-Coeur d'Alene, said the Legislature still faces difficult days.

"I think the shortfall is still so overwhelming that there's no relief," he said. "It's still a substantial challenge."

The deficit will continue to fluctuate, he said, as the Legislature continues the budget-making process.

"It's still kind of a moving target. It's still kind of iffy, depending on how much we cut," Hammond said.

As they consider the programs and agencies they'll have to eliminate, the legislators are making very tough choices, he added.

Roughly 20 percent of the state budget goes toward health and welfare, Hammond said. Education comprises 50-55 percent.

"They're the major cuts, because they're the major part of the budget," he said. "We hope to actually finish up at the end of March. That's still our target. The biggest challenge ahead of us is still the health and welfare budget and the cuts we have to make."