By AMY MERRICK

State budgets look bad now, but they’re set to get worse.

As lawmakers fight over patching current budgets, larger problems loom in the next few years. The bulk of funds from the federal government’s stimulus package will be allocated by 2011, but tax collections aren’t likely to be enough to take their place — even if the economy is recovering.

The drop in tax revenue is set to be deeper and last longer as collections have become more sensitive to business cycles in recent years. At the same time, states face growing health-care costs and the need to replenish pension programs funded by decimated investments. And some of the stimulus funds expand programs that will require state money to sustain them after the federal largesse runs out. Read the rest of this entry »