Yesterday the National Conference on State Legislatures released a report on how the recession is hitting state budgets, and the news was grim:

"The states are facing nearly unprecedented declines in revenue
collections," said William Pound, executive director of the NCSL.
"Coupled with probable declines in federal stimulus support over the
next two year, the state fiscal picture is bleak.  We're heading into
an era of retro budgeting, where state spending is receding to levels
five to 10 years ago."

And the "fiscal nightmare" won't end anytime soon, they say: Even after drastic cuts, states are still short over $28 billion for their 2010 budget -- even though the fiscal year doesn't start until June. "For many states," the authors say, "Revenue recovery isn't even in the forecast."What does this mean for the overall economy -- especially those who can't find work? The budget woes of states are a "ticking time bomb" for unemployment, argues the Economic Policy Institute argued in an October report:

These [state budget] shortfalls will result in hundreds of billions of spending cuts and tax hikes, which will likely result in millions of fewer jobs over the next two and a half years.

The Center on Budget and Policy Priorities agrees, projecting that state budget cuts could result in up to 900,000 job losses in 2010 alone.

State budget crises are a triple whammy for workers. They result in layoffs, which directly puts people out of work.

But the impact is even worse in the private sector; nearly a third of public spending supports jobs in private supplier industries, causing a ripple of job losses throughout the economy.

On top of that, budget cuts slash public services that low-income people need most, like public transit.

That has led EPI and others to conclude that federal aid to struggling state and local governments is one of the most important pieces of a national job-creation strategy.

Curiously, aid to states wasn't a focus of President Obama's major jobs address earlier this week. "Relief to states and localties facing layoffs" received only a passing mention in the final part (paragraph 20) of his speech.

Groups like the AFL-CIO will be pressuring Obama to make it a higher priority. As Seth Michaels argues on the labor group's blog:

Aid to help states meet their budget needs--especially in education
and Medicaid--was one of the most effective parts of the American
Recovery and Reinvestment Act earlier this year. We need to renew and
expand that vital assistance, so state and local governments can invest
in their communities and meet the needs of their residents struggling
with the economic crisis. Otherwise, working families could find their difficult times
compounded by higher state and local taxes, hundreds of thousands of
more lost jobs and damage to the schools, transit systems, police and
fire departments and health care facilities they need.