Feds, States, Cities: In One Fiscal Boat

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For many years, official Washington--its own "echo chamber," as some say--has been ignoring the financial needs and prospects of state and local governments.

That era is now coming to a crashing end.

The headline event is Gov. Arnold Schwarzenegger's appeal to the U.S. Treasury for an emergency $7 billion loan to cover California's immediate operating expenses. Massachusetts has submitted a request too.

The Wall Street fiscal crisis effectively shut the state-local government sector out of borrowing--either for long-term bonds or, of more immediate gravity, bridge loans to keep them afloat awaiting sales tax and April income-tax receipts.

But the stage for a "perfect fiscal storm" was already set by the seriously weakened fiscal condition of so many state and local governments. …