Top 10 States in Fiscal Peril

From California to New Jersey, states are being crushed by deficits.

ByABC News
November 13, 2009, 2:27 PM

Nov. 16, 2009— -- Enormous budget deficits in nearly every state across the country are "wreaking havoc" on government employees, the services they provide, and the residents who need them most, according to a new report by the Pew Center for the States.

Dwindling state tax revenues during the recession have forced states to furlough workers, raise taxes, crowd more kids into classrooms, and trim social services. But experts say those measures and others can only go so far in keeping many states from going broke.

"There's no question this is extraordinary. The worst situation in 50 years," Susan Urahn, director of the Pew Center for the States, told ABC News. "Fiscal year 2010 will be just as bad as it was last year. We saw a $180 billion cumulative budget gap in 2009 and predict the same for 2010."

Urahn says despite much national attention on California's budget crisis – the worst in the country -- nine other recession-stricken states are facing a similarly dire situation.

Arizona lawmakers are staring down a $1 billion gap in their 2009 budget with no immediate solution in sight. Rhode Island, the smallest state, continues to post among the highest unemployment and foreclosure numbers in the country.

Michigan is grappling with "a 1960s-sized budget," while Nevada struggles to raise taxes in light of a provision that requires voters to first amend the state's constitution.

Oregon, which experienced the greatest drop in state revenue over last year, faces a similar dilemma as voters in January 2010 get the final say on new income taxes to close the gap.

The Pew report lists Florida, New Jersey, Illinois and Wisconsin also among the top ten states facing the worst combination of foreclosure rates, jobless numbers, state revenue losses, budget gaps, legal obstacles to balanced budgets and legislators' poor money-management practices.

"These are the worst numbers we've ever seen in the decades," said Scott Pattison, director of the National Association of State Budget Offices. He says state budget crises have impacted every part of state government, including the employees and residents they serve.