Fiscal Chill Puts Squeeze on Several States

Lastest budget woes could exert pressure on education funding.

While most states are enjoying full—or even overflowing—tax coffers, a handful are confronting budget deficits that could threaten public school spending, the result of sluggish local economies and bigticket programs.

The financial squeeze is tightest in Michigan, where public schools face significant cuts unless the legislature and the governor can find a compromise on how to close a $700 million deficit this fiscal year.

Schools aren’t yet on the chopping block in California, Maryland, and Rhode Island, but all three states are scrambling to cope with projected deficits in the coming budget years. Teetering on the edge is Delaware, which is also seeing slack collections in almost all of its major tax categories, from...