Governors Warned of Rough Fiscal Waters

State leaders may have thought this budget year was tough, but fiscal 2009 will be even worse, predicts a new report by the organizations that represent the nation’s governors and their top budget officers.

States’ cash balances—a key sign of fiscal health—are declining, which means states will have a smaller financial cushion as they enter future budget years, according to the report. It was released today by the National Governors Association and the National Association of State Budget Officers, both based in Washington.

The report projects that states, on average, will have a financial cushion of 7.5 percent of total expenditures at the end of fiscal 2009, down from 11.5...