Courtesy of Michael J. Panzner, at Financial Armageddon. 
State and Local Budget Meltdown
During the good times, few state and local governments thought about what might happen if it all went wrong.
Polticians and policymakers failed to anticipate an inevitable bursting of history’s greatest housing bubble. They did not foresee an end to the debt-fueled hyper-binge of consumer spending. They skimped on essential maintenance and infrastructure replacement projects and, instead, bought peace (and votes) from public employees with unaffordable pensions, wages and fringe benefits.
Now, though, it is all coming home to roost. In an article entitled "State Budget Troubles Worsen," the nonpartisan Center on Budget and Policy Priorities details a rapidly deteriorating state of affairs that should not have been a surprise to, well, anyone.
States are facing a great fiscal crisis. At least 41 states faced or are facing shortfalls in their budgets for this and/or next year. Over half the states had already cut spending, used reserves, or raised revenues in order to adopt a balanced budget for the current fiscal year — which started July 1 in most states. Now, their budgets have fallen out of balance again. New gaps have opened up in the budgets of at least 31 states plus the District of Columbia just four months after they struggled to close the largest budget shortfalls seen since the recession of 2001. And these problems are expected to continue into next year.
Current estimates are that mid-year gaps total $24.3 billion — 6.6 percent of the budgets of the 29 states that have estimated the size of the gap — but they will almost certainly widen as the continuing economic turmoil causes revenues to come in below estimates in more states.
The 31 states facing mid-year shortfalls are Alabama, Arizona, California, Colorado, Connecticut, Florida, Georgia, Hawaii, Idaho, Illinois, Kansas, Kentucky, Maine, Maryland, Massachusetts, Mississippi, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Vermont, Virginia, and Wisconsin. In addition, the District of Columbia faces a budget shortfall. These budget gaps are in addition to the shortfalls that these and other states faced as they adopted their budgets for the current fiscal year. At that time, 29 states faced a total of more than $48 billion in combined shortfalls.
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