State Budgets Still Suffering, Analysis Shows

States across the country face a long road out of recession as they grapple with diminished revenues and persistent budget deficits, an analysis by the Associated Press found.

Some states have seen modest increases in the amount of money generated by tax collection but overall revenues are expected to be about $34 billion less than the fiscal year immediately prior to the financial crisis, a drop of five percent. Twelve states have budget deficits representing 15 percent or more of their budget for day to day operations, and states with the largest proportions of Medicaid recipients have the largest gaps to close.

Entitlement obligations amount to a bill of more than a trillion dollars. States owe $689.5 billion in unfunded pension liabilities and $418 billion for health care to retired workers, a financial burden that chief Standard & Poor's economist David Wyss, called the biggest headwind that the states will be fighting against.

The problem is exacerbated because federal stimulus funding, which totaled $316 billion and helped to fund education and healthcare, has vanished. The AP found that most states have sought to balance their budgets by enacting deep spending cuts, although a small minority of states chosen to raise taxes.