Even if the economy rebounds, a gloomy forecast for states

The problems facing states are often masked by lax budget laws and opaque accounting practices, according to the report, an independent analysis of six large states released by the State Budget Crisis Task Force. …

The report added a strong dose of fiscal pessimism just as many states have seen their immediate budget pressures begin to ease. And it called into question how states will restore the services they have cut during the downturn, saying that the loss of jobs in prisons, hospitals, courts and agencies have been more severe than in any of the past nine recessions. …

Even before the recession, Medicaid spending was growing faster than state revenues, and the downturn led to higher caseloads — making the program the biggest share of state spending, as states have cut aid to schools and universities. States have not set aside enough money to cover the health and retirement benefits they owe their workers. Important revenue sources are being eroded: states are losing billions of sales tax dollars to Internet sales and to an economy in which much consumer spending has shifted from buying goods to buying lightly taxed services. Gas tax revenues have not kept up with urgent infrastructure needs. And distressed cities and counties pose challenges to states.