A handful of states are already in clear trouble as the budget-process for the next fiscal year begins. Though states have dealt with shortfalls for several years in a row now, some of them are finally learning that one-time fixes aren't going to work any longer.

Washington State Treasurer Jim McIntire has learned some lessons from the fast and loose Wall Street accounting that plunged the country into recession - he's learned to obfuscate and mislead. When current and prospective bond holders look to Treasurer McIntire to understand the condition of the state's pension fund, they'd best beware.

Treasurer McIntire appears to be going beyond simple carelessness or cleverness. Treasurer McIntire is leading bond holders to believe the State Actuary's grim Risk Assessment fully reflects the condition of the pension fund. In fact, the situation is much worse. And Treasurer McIntire knows it.

Public sector compensation and retirement benefits have made headlines lately for their sheer size and weight in comparison to the private sector. The problem of unfunded liabilities is decades in the making, but the bills are starting to come due this legislative session. Budget leaders are learning that they won't have decades to undo this disaster.

A growing number of states, California among them, already have hefty budget shortfalls mounting for the next fiscal year amount to billions of dollars in some cases. Here's a look at some of the latest developments in state budget shortfalls.

States that have continually refused to reform their budget practices are starting to feel the pain. In particular, many states have failed to revise their spending plans to align with revised (and decreased) revenue projections.

The 2010 supplemental budgets boosted total state spending by $3.3 billion, continuing the trend of higher government spending.  This state spending is being propped up with underfunded pensions; altered actuary
recommendations; use of one- time federal stimulus, and money raided from other accounts, most of which will need to be refilled.  But new spending for healthcare benefits in the 2010 operating budget added $82 per employee per month to the state’s contribution.

The Federal Education Jobs Fund that gives the states $10 billion for K-12 education to crate or save 160,000 teacher jobs is a hoax.  Many of the teachers it was intended to save have already been rehired.  Any state accepting the funds must be aware of the "maintenance of effort" (MOE) requirements if they accept the federal funds, including the insbility to lower education funds.

Fiscal stress and strain continues in the fifty states this week as more legislators look for ways out of the black holes in which they find themselves. Solutions sought by states include delayed retirement, increased pension contributions, and furloughs.

Though most states have by now enacted their budgets for the next fiscal year, their financial woes are far from over. As programs that relied on stimulus funds continue to see their funding decline and states struggle through the recession, budgetary games and gimmicks will continue.

Bob Williams' testimony before the Governor's Budget Advisory Committee on Monday, July 19, 2010.

State budget news highlights from across the country for the week out July 12.

Quite a few states were working on their budgets for the fiscal year starting in July as late as yesterday. The following states still don't have budgets

The Office of Financial Management (OFM) is currently negotiating 23 agreements for state employees. Considering the governor's budget office forecasts multibillion-dollar deficits for the next eight years, now is the time for the governor and legislative leaders to demand major labor concessions.

If Gov. Chris Gregoire and lawmakers don't provide leadership now in terms of concessions, it will be two years before another opportunity presents itself. In the meantime, funding the current agreements is a price too high to pay.

Another week has gone by and seen more budgets unbalanced, deadlines missed, and shortfalls ignored. Instead of pursuing long term solutions, legislators and governors in our states continue to seek the easy way out. While most of the budget gimmicks being employed push costs into the future, some states are already starting to pay the price of fiscal foolishness.

States are still facing serious budget woes and many of them remain indignant at the prospect of serious reform. At least 30 states will have state budget shortfalls because they relied on increased federal stimulus spending for education and Medicaid.  This is despite the fact that they were told last year that the funding was one-time and that the states had to "maintain the effort" when the federal funds expired.