A really good article on our cash-strapped states. While the national numbers are finally looking up, the states are having a harder time recovering from 2008 for a variety of reasons. I have snipped some items of interest, but the whole article is an eye-opener.

States of Siege
The worst recovery in decades has changed the way local governments tax and spend.
Steven Malanga

The situation may not change for the better anytime soon. With many economists forecasting mediocre growth, and another recession inevitable at some point, states and cities may be moving into a prolonged period of austerity. “U.S. states have entered a new era characterized by chronic budget stress,” the financial analyst Gabriel Petek, a managing director in the U.S. Public Finance group at S&P Global Ratings, wrote last April in a blunt warning to taxpayers.
Local governments got a sense that something might be different starting in 2009, when state tax revenues, hammered by the steep recession, collapsed by nearly 9 percent—only the second time in the postwar era that state revenues had declined from one year to the next. Then revenues slumped again in 2010, by 4 percent this time, leaving governments tens of billions of dollars short of where they’d been just two years earlier. What followed was a slow recovery of tax collections; it took states until 2016 to regain everything that they had lost in the recession, on an inflation-adjusted basis. States needed only slightly more than half that time to rebound after the recessions of the early 1990s and 2001–02. While some of the currently hard-hit states are energy producers suffering from falling oil prices, even economically robust states like North and South Carolina, Arizona, Florida, and Georgia have struggled to recoup revenues, in part because of precipitous real-estate declines that have hampered their growth.

The aging of America is raising the proportion of retirees relative to the number of workers in many states. One sign of how swiftly this is happening is the transition from wages to retirement income: worker wages went up by 18 percent in the half-decade ending in 2014 (the latest available data), while Social Security payments rose more than 50 percent and IRA distributions by more than 75 percent. Those swelling retirement monies don’t pay off for states the way a boost in worker pay does; on average, retirees have lower incomes and enjoy more tax breaks than do the employed.
Medicaid has been the biggest driver of the new spending. Last year, states spent $211 billion on Medicaid, out of $1.29 trillion in total expenditures. That sum represents a nearly 70 percent rise in spending on the program in ten years and a 220 percent increase over 20 years. Including federal dollars that flow to states, Medicaid now eats up more than a quarter of state budgets.

And more is coming. Thirty-two states expanded Medicaid under the Affordable Care Act to previously ineligible households. Though the federal government initially picked up most of the Obamacare costs, states must gradually start paying a share. The percentage is small, but states were already having trouble financing Medicaid before they extended coverage; the new costs will intensify the challenge.
An immense pension crisis also looms over local governments. States and municipalities have amassed at least $1.5 trillion in this debt—equal to what states collect in taxes in one year—though some estimates put the real cost at three times that much...

Governments are struggling to make the necessary payments. In a September meeting with CalPERS, the giant California public pension fund, representatives from a dozen California localities complained that dramatically rising pension costs—projected to triple for some cities and school districts—will lead to a “gradual strangulation” of public services. “In three to four years our cash flow is going to be gone,” the finance director of Oroville testified. “We don’t even know how we are going to operate past four years. We have been saying the bankruptcy word, which is not very popular.” Sharp increases in contributions demanded by CalSTRS, the state’s teacher-retirement fund, are similarly squeezing school districts....
More at the link above.