Six years after the recession ended, many U.S. states are hardpressed to balance budgets because of a sluggish recovery and theirown policy decisions. The fiscal fragility raises questions abouthow they will weather the next economic downturn.

A majority of states are making cuts, tapping reserves or facingshortfalls despite an improving national economy and stock marketsat record levels, according to Standard & Poor's and the NelsonA. Rockefeller Institute of Government. State revenue hasn'trebounded to a prerecession peak adjusted for inflation, and otherfactors are putting pressure on budgets.

Alaska, Oklahoma and energy-producing states saw receipts fallwith global oil prices. Kansas overestimated revenue after taxcuts, while New Jersey faces a shortfall thanks to unfundedpensions. Even some Republican governors have championed taxincreases to avoid further diminishing services curtailed duringthe 18-month recession, the deepest downturn since the GreatDepression.

“The extent of the weakness is really impressive,” said DonaldBoyd, who tracks state finances at the Rockefeller Institute inAlbany, New York. “There's a lot of pressure on governors andlegislators.”

Thirty-two states faced budget gaps in fiscal 2015 or 2016 orboth, according to an April 27 report by Standard & Poor's. Thefiscal year ends June 30 in all but four states.

Spending on education, roads repair and other services isthreatened. Some Kansas schools are closing early, while AlaskaGovernor Bill Walker on Monday threatened furloughing as many as15,000 workers if lawmakers don't act on a $3 billion gap. AlabamaGovernor Robert Bentley has warned of impending cuts, including theclosing of 15 of 22 state parks.

While the shortfalls don't pose immediate risks to creditquality, having so many now is “an early warning” aboutvulnerability when the next downturn hits, said Gabriel Petek, acredit analyst at Standard & Poor's in San Francisco.

“We don't see a lot of slack built into the state budgets,”Petek said. “They just don't have a lot of room for error.”

State governments have about half the reserves that they hadbefore the recession, according to the Pew Charitable Trusts.

The struggles have led to credit downgrades during the past yearin Kansas, New Jersey and Pennsylvania, and the outlook forLouisiana was lowered in February. Across all state and localpublic entities, credit upgrades outpaced downgrades in the fourthquarter for the first time since 2008, Moody's Investors Servicesaid in a February report.

Sunny California

Not all states are struggling. California Governor Jerry Brownsaid last week that an expanding economy has allowed a boost inproposed spending next year to a record $115 billion.

Others, including Arizona, Missouri and North Carolina, saw an“April surprise” of higher-than-expected income taxes after federaland state levies were paid, according to the National Associationof State Budget Officers in Washington. Most states can expect slowgrowth in the coming year, said Brian Sigritz, the group's directorof fiscal studies.

Still, improvement in employment, consumer spending and revenuehas grown more slowly than in previous recoveries, said Boyd of theRockefeller Institute. A dozen states still haven't recovered alljobs lost since the start of the downturn in December 2007, hesaid.

Aggregate general-fund revenue and spending haven't rebounded toinflation-adjusted fiscal 2008 levels, according to a survey by theState Budget Officers released in December. Revenue of $748 billionfor fiscal 2015 would have to be $15 billion higher to match real2008 levels, the group said.

“The one word we have not used since the recession has been'robust,'” said Arturo Perez, Fiscal Affairs Program director atthe National Conference of State Legislatures in Denver. “That'sleft states vulnerable.”

While revenue growth has been sluggish, states have had to spendmore on things such as Medicaid, Boyd said. Mounting pensionshortfalls are also squeezing states including Illinois, New Jerseyand Pennsylvania, he said.

The situation has become so bleak in some states that evenRepublican governors loath to raise taxes have proposed higherlevies.

In Nevada, two-term Republican Governor Brian Sandoval hasproposed $1.1 billion in new or continued taxes to pay foreducation and initiatives such as expanding full-daykindergarten.

He has said he has no choice with a shortfall caused bydeclining mining and gambling revenue, as well as a need to bolsteran education system that has the worst high-school graduation ratein the U.S.

Alabama's Bentley, a two-term Republican, has proposed raising$541 million through taxes on cigarettes, car sales and other itemsto avoid deep cuts to essential services with a long-buildingbudget funding shortfall of $700 million.

“We have a real crisis on our hands,” Bentley said at a meetingSaturday with members of the Alabama League of Municipalities,according to a release.

Bloomberg News

Copyright 2018 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.