States rely on Federal Government for most of their money...

Well now, this is a first. The states relying on the Federal government as opposed to the Federal government relying on the states. (just goes to show how many taxes we're really paying to the IRS and via other taxes)

http://www.usatoday.com/news/nation/2009-05-04-fed-states-revenue_N.htm

Here's the problem, the Federal money comes with strings attached. (not a surprise there)

Perhaps here's the most telling part of the story:

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States are counting on tax collections rebounding by 2012, when stimulus money starts to run out.

The early flow of stimulus money helped lift total state and local revenue by 1.6% in the first quarter compared with a year earlier despite a 2.9% drop in total tax collections. Spending rose 1.5%.

Things are getting worse for states that rely on the income tax. Reason: Unexpectedly large refund checks in March and April are going to workers who lost jobs or had wage cuts last year.

Michigan's income tax collections are down $200 million and refunds are up about $200 million — a $400 million swing. Connecticut has paid nearly $1 billion in tax refunds this year, about 20% more than expected. "These are big numbers. It's put us in a very bad situation," says Connecticut Comptroller Nancy Wyman."

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That's right, states continue to spend even when the money isn't coming in. Here's a clue people: Spend less, save more. Isn't that what you tell your citizens? How about trying a little bit of that yourselves.