10 States Face Financial Catastrophe

(Nov. 17) -- California is in deep trouble. And it isn't alone.

According to a new study from the Pew Research Center called "Beyond California: States in Fiscal Peril," nine other states face comparable economic challenges in light of the recession of 2008 and 2009.

Pew identified six factors that helped contribute to California's record budget shortfall and compared those markers with those in other states. The categories were a state's overall revenue change; its current budget gap; the change in its unemployment rate; its foreclosure rate; whether a super-majority is needed to amend its constitution; and how each state manages its resources.

The resulting score is meant to convey an idea of how daunting the economic problems are for a given state. The results showed 10 states in danger of heading off a financial cliff. In order from the best economic shape to the worst, they were: Wisconsin, Illinois, New Jersey, Florida, Nevada, Oregon, Michigan, Rhode Island, Arizona and California.

"While a lot of attention is being paid to the 10 states we highlight, there is a second strata of states that is not far behind," says Barbara Rosewicz, one of the study's editors.

While the U.S. economy officially pulled out of recession this fall after posting a 3.5 percent rise in GDP, Rosewicz says the individual states may not have seen the worst of the economic turmoil. "History shows, if you look at previous recessions, that states have the worst time after a recession has ended," Rosewicz says.

The most important step that states need to take in order to navigate though the recession's aftermath, Rosewicz argues, is to successfully pass budgets that address revenue shortfalls. "How are states going to balance their budgets? That's really the question."

According to Pew's study, California hasn't exactly provided a good model for the rest of the country.

"California's problems are in a league of their own," the report's executive summary concludes. "But the same pressures that drove it toward fiscal disaster are wreaking havoc in a number of states, with potentially damaging consequences for the rest of the country."