States are looking at a total budget gap of $180 billion for fiscal 2011, which for most of them begins July 1. These cuts could lead to a loss of 900,000 jobs, according to Mark Zandi, chief economist of Moody's Economy.com.
"State and local government spending is a very important driver of the national economy, especially when the private sector is faltering," said Jon Shure, deputy director of the Center on Budget and Policy Priorities' State Fiscal Project.
To close this gap, governors and lawmakers will be forced to lay off state employees, cut services and postpone capital projects, said Michael Bird, federal affairs counsel for the National Conference of State Legislators.
The cutbacks will all work against an economic recovery.
Already, states laid off 44,000 workers in the 12 months ending in January, according to federal labor statistics.
In California, for instance, Gov. Arnold Schwarzenegger is proposing deep cuts to health care, education, the state workforce and social services programs. The governor is looking to Washington D.C. for $6.9 billion for its fiscal 2011 budget, on top of the $6 billion in stimulus funds it is using.
"We believe that providing funds to states will provide the flexibility critical to jumpstart our economy and create jobs," said Eric Alborg, communications director of the California Recovery Task Force.