Just as state governments are healing from the deep fiscal wound inflicted by the Great Recession, they are confronted by the dual threat of reduced federal help and ever increasing health-care costs, according to a new report.

Health and Human Services Secretary Kathleen Sebelius warns governors that the federal government will not pay for limited coverage of low-income residents.

Governor Deval Patrick blamed political gridlock in Washington and the so-called fiscal cliff as a "direct cause" of the economic slowdown that has tamped state tax collections and created a $500 million budget shortfall. But economists say other factors deserve more blame.

This forecast has even more uncertainty than usual due to the fiscal crisis that looms in Washington.

Governor Deval Patrick blamed gridlock in Washington's fiscal cliff negotiations for a $540 million state budget gap.

With a few weeks remaining before the onset of "fiscal cliff," a bipartisan delegation of governors is set to meet with President Obama and congressional leaders in search of some answers about the impact of deficit reduction measures on their state budgets.

Many state and local leaders -- like the rest of the country -- are wondering what, exactly, will happen if their efforts lead to naught.

No solid numbers have yet emerged as to the actual cost to the state of the lost income, sales and corporate tax revenues - not to mention the cost of state-sponsored remediation projects.

There is a long history of the federal government's giving short shrift to the needs of states and cities - by making cuts in federal aid that forced service cuts or tax increases at the local level, or by passing laws requiring localities to take expensive actions without giving them the money to do so.

Virginia would be one of the states most affected by the automatic spending cuts - 9.4 percent for defense programs and 8.2 percent in non-defense appropriations - because one-third of its gross state product comes from direct federal expenditures, the highest percentage in the nation.

It is well understood that the federal government must make spending cuts-these cuts will most likely drastically change the amount of federal dollars that are allocated to the states. Unfortunately for most states, dependence on federal funding has continually risen since 2008.

The Patient Protection and Affordable Care Act (PPACA), signed into law on March 23, 2010, made significant changes to the way eligibility for the Medicaid program will be determined and who the program will cover. State governments will play a key role in implementing many aspects of this reform, which must be in place by the beginning of 2014. States will need to address the financial implications of implementing this Medicaid expansion and accompanying enrollment systems.

States will face particularly intense budgetary challenges in education and health care in fiscal 2013, putting pressure on all budget areas - including corrections and infrastructure. As budgets face strain from slow revenue growth and expenditure pressures, states will likely confront tough budgetary choices in the next fiscal year.

The Health Care Compact is an interstate compact - which is really just "an agreement between two or more states that is consented to by Congress" - that would return the authority and the responsibility to regulate health care back to the member states.

Fixing Maine's welfare system requires embracing a Wisconsin-style approach and keeping the system focused on promoting work and self-sufficiency. Maine's current welfare system does just the opposite, trapping people and families in poverty and promoting dependence and an overreliance on government.

South Carolina should refuse federal No Child Left Behind Funds and the accompanying mandates and find a way to fund poor school districts adequately.

In the wake of the failures of the famed "Super Committee," $1.2 trillion in automatic cuts go into effect in 2013, and those cuts will undoubtedly impact state budets.  Although multi-faceted, the problem is clear: states must learn to fend for themselves financially.

Replacing the current federal financing structure of Medicaid with fixed allotments to the states would help save both state and federal budgets. Without this policy change, states will dig further budgetary holes and the federal government will face an increased likelihood of a debt crisis.  If states received a non-fungible Medicaid block grant from the federal government rather than fungible matching funds, each state would have the incentive to reign in Medicaid spending.  If states were freed from the myriad federal mandates (such as the “maintenance of effort” clause of the Patient Protection and Affordable Care Act) they would gain the ability to run Medicaid efficiently.