The massive economic upheaval is imposing a heavy burden on state governments throughout the nation, with revenues plunging, pension funds sinking, and costs rising. With access to credit markets still somewhat limited cash flow problems could force states to come hat in hand to the federal government, looking for short term assistance (or more). Califormia may find itself in that position shortly. From MSNBC:

Gov. Arnold Schwarzenegger warned he may have to beg the federal government for a short-term loan to cover operating costs for schools, nursing homes and police if the nation’s most populous state is unable to borrow a short-term $7 billion on the credit market.

The contagion is spreading to many others as well:

Dozens of states are expecting big drop-offs in revenue and dispiriting pension-fund losses, and are making another round of emergency spending cuts on top of deep cutbacks earlier in the year, when the economy began softening and the mortgage crisis started to unfold.

“I think everybody agrees: The iceberg is in sight,” said Murray Levy, a Maryland state lawmaker.

New York, the capital of the nation’s financial industry, is grappling with the highest unemployment rate since the Sept. 11, 2001, terror attacks and a $1.2 billion deficit that could balloon to $2 billion by the end of the fiscal year March 31.

“We’re going to have to take drastic action,” Gov. David Paterson said.

In Massachusetts Governor Patrick is expected to announce a new round of cuts that will trim hundreds of millions of dollars from the state budget. While he is seeking expanded 9-C authority from the legislature that has not been granted, as of yet. Lt. Governor Tim Murray will be hosting the mayors of the Commonwealth at 2:00 tommorow afternoon to provide more detail on what actions the Governor is expected to take. I will attend that meeting and listen attentively. Look for a blog posting here tommorow on the meeting.