The New York Times is getting on board the "help the states" bandwagon.

Wall Street's crisis is walloping state finances across the country. The most urgent problems are in states -- like California -- that rely on short-term financing to help pay their bills until tax revenues start coming in later on in the fiscal year. This is about the safest debt on the market. Still, over the past few weeks, states have been shut out of the credit markets like everybody else.

The credit freeze that followed the events on Wall Street and in Washington over the last few weeks has dramatically effected the states. California may need a $7 billion loan from the Federal Government to cover short term cash needs. And last Friday, the New York Times reported that Massachusetts may be in a similar position:

Treasurer Timothy P. Cahill's requests last week to the Treasury Department and the Federal Reserve Bank of Boston were prompted by the state's inability to borrow from the short-term debt markets, The Boston Globe reported on Saturday. The financial turmoil has caused credit markets to stop lending, or to charge prohibitive rates.

And more states are sure to follow. According to a report by the Center on Budget and Policy Priorities:

New gaps have opened up in the budgets of at least 15 states plus the District of Columbia just two months after they struggled to close the largest budget shortfalls seen since the recession of 2001. These 15 states include more than half of the 29 states that have already moved to cut spending, use reserves, or raise revenues in order to adopt a balanced budget for the current fiscal year -- which started July 1 in most states. Now, their budgets have fallen out of balance again

The 15 states on this list are pretty diverse too:

The 15 states facing additional shortfalls are Arizona, Connecticut, Florida, Georgia, Hawaii, Illinois, Maryland, Massachusetts, Nevada , New Hampshire, New York, Ohio, South Carolina, Vermont, and Virginia.

So without short term borrowing on the table, these states are going to have to rely on tax revenue to make up the difference, which goes completely against tax revenue trends during economic downturns. According to the NYT Op Ed, the worst economic downturn since the Great Depression is no different:

As the economy tips deeper into recession, state tax revenues are expected to plummet. Gov. David Paterson of New York has already proposed $2 billion in immediate spending cuts. Even states that are less dependent on Wall Street than New York will have to figure out how to raise new money or reduce services, just when the public needs more help. This will intensify the economic downturn.

The prognosis for states is grim if the Federal Government does not step in the same way they did for Bear Stearns, Fannie and Freddie, AIG, et al. And the solution is one I've been calling for since day one:

Washington must step up. To start, the federal government must help states like California and Massachusetts get past their short-term liquidity squeezes. Congress also must prepare a new stimulus bill, with bolstered aid for food stamps and assistance to states and cities so they can continue to provide health care and finance construction and other projects that provide jobs.

But lets be honest, if Speaker Pelosi and Majority Leader Reid don't lead the charge on getting this done, it is going to lay dormant until it is too late. The cynical nihilists on the GOP side of the aisle in the House, coupled with the debacle that was the Wall Street bailout leads me to believe that Congressional Republicans would be more than happy to throw California and Massachusetts under the bus to avoid going back into session. Especially since their electoral votes are not going to be contested.

I hope I am proven wrong, because aid from the Federal Government has worked before:

In 2003, Washington gave states $20 billion in grants and increased Medicaid contributions to help them dig out of the 2001 recession. We hope this time it will act a lot faster.

So do I.