Economy has some states tangled in 'dire' financial snares

— -- The nation's weak economy has landed some big states in a desperate struggle to balance their budgets before July 1 when their new fiscal years begin.

Arizona, California, New Jersey, Nevada and Pennsylvania are among states that must slash spending or raise taxes to straighten out their finances.

"The philosophical differences are so great and the financial problems so dire that it's impossible to have any idea what's going to happen," said Launce Rake of the liberal Progressive Leadership Alliance of Nevada.

Nevada Gov. Jim Gibbons, a Republican, plans to call a special session of the Legislature next week to find a last-minute solution to a budget shortfall approaching $1 billion.

Nationally, state and local government revenue rose 3.5% in the first quarter compared with a year earlier, outpacing private sector growth. The average is deceptive.

Revenue is booming in about a dozen states because of high energy and agricultural prices, said Scott Pattison, executive director of the National Association of State Budget Officers, which issued a report on state finances Thursday. Texas, New Mexico, Montana and Wyoming are among the thriving states. Revenue is up 14% in West Virginia, a coal state, Pattison said.

The budget picture is grim in states that had soaring housing prices that collapsed. "This is going to be a three- or four-year struggle for those states," said National Governors Association executive director Ray Scheppach. States wrestling with severe problems:

•Arizona. The state has never missed its budget deadline but is preparing for a government shutdown July 1 that could temporarily idle 30,000 state employees.

Democratic Gov. Janet Napolitano and leaders of the Republican-controlled Legislature have been deadlocked over how to close a $2 billion gap between projected revenue and planned spending. The governor wants to borrow most of the shortfall, allowing schools to be built with debt rather than on a pay-as-you-go basis.

"They're playing chicken right now. But there's a genuine effort to avoid draconian cuts," said David Berman, a senior fellow at Arizona State University's Morrison Institute for Public Policy.