Underplayed Story of the Day: State Budgets

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It hasn’t gotten much national attention amid all the other political news, but the flush times are over. Governors and state legislators across the country say their fiscal situations are rapidly sliding toward the dire conditions of a few years back, thanks in large part to the burst of the housing bubble and its ripple effects. The AP brings us the third significant warning in a month, this one from the Center on Budget and Policy Priorities, where an official says:

“We’re really teetering on the edge,” said Iris Lav, the center’s deputy director. “With the deficits this large already before there’s actual evidence we’re in a recession, that seems quite serious.”

If in fact the country is on the edge of a recession, as more and more economists seem to think, we may also be on the edge of a full-blown fiscal crisis in the states. One possible casualty may be California’s ambitious plan for health care reform. The Massachusetts-style proposal cleared a big hurdle yesterday, with House passage. But the outlook is uncertain:

The Senate president pro tem, Don Perata, has said he will not bring his members back to Sacramento until the 2008 session begins on Jan. 7.

Though Mr. Perata, a Democrat from Oakland, has endorsed the plan’s general concept, he is worried that the state’s budget problems make it impractical. On Monday, he asked legislative fiscal analysts to study the Assembly bill’s long-term fiscal implications, particularly in light of any cuts in social services that may be made to bring next year’s budget into balance.