Beyond California: States in Fiscal Peril

Nov 11, 2009

The nation is watching closely as California struggles to avoid going broke.

So far, the most-populous state—and eighth biggest economy in the world—has unsuccessfully sought a $7 billion federal loan guarantee to pay its bills, temporarily issued IOUs to state employees and business contractors because it ran short of cash, and started shutting state offices several Fridays a month to close the largest state budget gap in the country. The same housing-market bust that triggered the national recession in December 2007 also set off the Golden State’s fiscal crisis. But a challenging mix of economic, money management and political factors has pushed California to the brink of insolvency.

California’s problems are in a league of their own. But the same pressures that drove it toward fiscal disaster are wreaking havoc in a number of states, with potentially damaging consequences for the entire country.

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