The collective eye has been on California as they are very close to issuing IOU’s to vendors for services rendered to state agencies, along with severe cuts in some services – something I talked about yesterday.  Well California may have some company as several other states are suffering from the same financial malady with a deadline to balance their budgets.

Besides California, you can add several other states – Indiana, Pennsylvania, Mississippi and Arizona – to the financially insolvent.  All of these states are bracing for possible shutdowns this week as time is running out for lawmakers to close their billion-dollar gaps in their 2010 fiscal budgets.  How severe is all of this?

Well according to the National Conference of State Legislatures, of the 46 states whose budget year ends today, 32 of them did not have budgets passed and approved by their respective governors as of Monday afternoon.  More than likely, a good number of states will pass eleventh-hour budgets, there are at least several states that are in grave danger of becoming insolvent as of Wednesday.

Interestingly enough, since 2002, only five states have had to shut down their governments.  The aforementioned five states have their own unique set of circumstances that got them to where they are today:

• California.  State finance officials will begin issuing IOUs on Thursday if lawmakers and the governor cannot agree on a way to close a $24-billion shortfall. The IOUs would go to local governments, vendors, taxpayers and college students receiving state financial aid. California has issued such IOUs only one other time — in 1992 — since the Great Depression.
• Arizona.  While they have never missed its constitutional budget deadline, officials are battling over how to resolve a $3-billion gap. Republican lawmakers and the state’s GOP governor, Jan Brewer, fought for months over her proposal for a temporary sales tax hike to preserve some government services. In a compromise unveiled Friday, legislators agreed to ask voters to approve the tax in November. But when a key committee was unable to muster a majority Monday for the compromise bill, lawmakers began drafting resolutions that would let the government function for at least a week.
• Indiana.  The budget fight revolves around how to allocate the state’s shrinking revenues and how much of its $1.3-billion surplus fund to tap. Democrats in the state House and Senate are pushing for more spending on schools, particularly in economically troubled and urban areas. GOP legislators, on the other hand, are advocating that extra funds be directed toward charter schools and that scholarship donors to private schools be given a tax credit.Another key sticking point is whether to help bail out the Marion County Capital Improvement Board, which manages the sports and convention venues in the state’s capital. Lawmakers from outside the Indianapolis area are furious over the idea of state money being used to bridge the board’s $47-million budget deficit, rather than spent in a way that would benefit more Hoosiers. By late Monday evening, after months of debate and several budget drafts, legislators left the Statehouse with glimmers of hope that they could avoid a shutdown.

And all of this because of the national economy taking a big, collective dump.  Of which offers a “trickle-up” effect, when the smoke clears.  But on a state and national level, it all begins and ends with what happens in California; the next 24 hours will dictate where the other states are headed financially.