ABSTRACT
In the aftermath of the global financial crisis of 2008, the 50 states face a fiscal crisis as great as any in their history. Those that were well managed and well prepared for normal economic cycles are as challenged and threatened financially as those that did not plan or manage well. In most cases, responses to date have been measured and incremental and have not always been commensurate with the magnitude of the crisis. However, some states (such as Michigan) have seen the recession come at a time when the state economy was already under pressure from economic restructuring. Michigan may be the first (but not the last) to ask basic questions about what the role of a state should be and whether or not there needs to be a fundamental change in what citizens should expect from it. Basic functions and governing approaches are under examination in radical and historic ways. Looking forward, each of the states faces major challenges and few politically attractive ways to address them. We see at least three possible approaches, depending on the length and severity of the fiscal crisis: (1) they may just hand power back and forth between parties as each finds its solutions and strategies and each party in turn loses popular support in successive elections; or (2) they may “spread the pain” and do everything a little less fully and a little less well; or (3) they may follow the lead of states like New Jersey and Michigan and restructure their roles vis-a-vis the federal government, each other, local governments, and nonprofits and fundamentally change how they respond to major social issues.
