Jeremy Gerst and Daniel Wilson, both economists at the San Francisco Fed, have just published an Economic Letter in which they describe the struggles of state governments to make ends meet.  And they share two telling graphs.  First, a look at what happened to revenue when real GDP dropped:

And then a look at how spending changed (or rather, didn't) as revenue dropped:

The picture, Gerst and Wilson write, is not bound to look any prettier for some time:

All indications are that states will be struggling to move their budgets toward balance for quite some time. Recovery of state finances historically lags recovery of the national economy. Forecasters expect the national economy to recover gradually (see Weidner and Williams 2010). Thus, it will take quite a while before states see considerable improvement in their fiscal health. Indeed, estimates from the Center on Budget and Policy Priorities show significant state budget gaps persisting through at least 2012. And a recent Rockefeller Institute report noted that most states are uncertain when revenue will return to prerecession levels, indicating the problem could continue well beyond 2012 (see Boyd and Dadayan 2010).