When Gov. Linda Lingle announced that 1,100 state workers could lose their jobs because of the state's budget deficit, she suggested it could be much worse.

Nationwide, stung by the drop in revenue collections because of the recession, states had to close a $142.6 billion shortfall in budgets for fiscal year 2010, according to a new report by the National Conference of State Legislatures. Eight states missed budget deadlines on July 1 and scrambled to pay state workers and bills while rushing to patch holes that may grow larger if the economy does not improve.

• In California, the state controller issued IOUs this month to cover general-fund payments to local governments, private contractors and state vendors. A deal reached Friday by state lawmakers to help with a $26 billion deficit includes significant cuts to public education, social services and prisons. Gov. Arnold Schwarzenegger, who had ordered state workers to take two unpaid days off a month, insisted that workers take a third furlough day.

• In Pennsylvania, thousands of state workers received partial paychecks this month and may not get paid at all if a budget impasse lasts through this week. Gov. Ed Rendell asked the Mortgage Bankers Association of Pennsylvania to give state workers flexibility with home mortgage payments so late payments would not threaten their homes or credit ratings.

• In Illinois, Gov. Pat Quinn signed a late $26 billion budget that includes $3.5 billion in borrowing to cover state worker pension payments and leaves $3.2 billion in unpaid bills. Quinn has also called for layoffs of 2,600 state workers and up to 12 furlough days to help save money.

Corina Eckl, the fiscal program director at NCSL, said many lawmakers who attended the NCSL's annual legislative summit in Philadelphia last week described the budget challenge as grim.

"One lawmaker, when I said 'What's the situation in Illinois?,' he said 'Well, that story is best told at night around a campfire.' And that really is the sense of it.

"These are frightening numbers that states are seeing. These are massive budget gaps that they are confronting. This is expected to last at least another year, possibly two, maybe even longer. It will depend on when the national recession ends."

In Hawai'i, state lawmakers used a combination of spending cuts and tax increases to balance a two-year budget. Revenue collections have continued to fall below expectations, however, so the state is facing an estimated $786 million deficit through June 2011.

Lingle had ordered state workers to take three furlough days a month for two years but a Circuit Court judge ruled this month that furloughs are subject to collective bargaining. The governor has moved ahead with 1,100 layoffs while negotiating with public-sector labor unions on labor savings in new contracts.

While, in the end, what happens in other states has no impact on how Hawai'i will balance its budget, the governor has used the financial problems in other states as examples of why Hawai'i needs to act now to avert a larger crisis.

According to the NCSL report, at least 24 states cut spending to close budget deficits and two states relied entirely on cuts to solve shortfalls this fiscal year. At least 11 states raised taxes. And at least eight states used money in rainy day funds.

Twenty-five states took advantage of federal stimulus money provided by President Obama and Congress to help close deficits.

A separate survey by the National Governors Association found that 17 states used layoffs and 15 states opted for furloughs to help eliminate shortfalls this fiscal year.

State House Vice Speaker Michael Magaoay, D-46th (Schofield, Mokule'ia, North Shore), who attended the NCSL's summit, said lawmakers he spoke with are going through budget pain similar to that of the Islands. He said some other states have used rainy day funds and other special funds, while Hawai'i lawmakers have been more cautious and have so far preserved the state's rainy day fund and hurricane relief fund.

"Right now, we just have to hang on," he said. "We have to look at making cuts where we can and at being creative. Until we see the bottom, we won't know what we're going to have to do."

Magaoay said lawmakers will not know the full financial picture until Lingle and the unions reach agreement on new contracts. He said lawmakers have no plans to return in special session on the budget.

"Basically, as soon as we settle, we'll know the direction we'll be heading," he said.

Lingle has cited California, the nation's most populous state, most often in her warnings. The Golden State's $26 billion budget deficit is larger than Hawai'i's entire two-year operating budget — $10.8 billion this fiscal year and $10.4 billion in 2011.

Like Hawai'i, California has a Republican governor and a Democratic-controlled state Legislature. Schwar-zenegger and Democrats in the state Assembly and state Senate have clashed over public policy, especially on new taxes and education and social-service spending. But state law requires two-thirds' votes by the Legislature on the budget, new taxes or bills that take effect immediately, so majority Democrats often have to compromise with minority Republicans and the governor.

Daniel Mitchell, professor emeritus of public policy and management at the University of California at Los Angeles, said Schwarzenegger often gets along better with Democrats in the Legislature than conservatives in his own party. A Sacramento Bee political writer wrote a book on Schwarzenegger's rise called "Party of One."

Mitchell said structural issues, such as relying on borrowed money and the legacy of voter-approved limits on property taxes, left California vulnerable when the recession hit. California's general-obligation bond ratings have been downgraded because of the state's budget deficit and are among the worst in the nation.

"If you're kind of living off borrowed money and then things get worse, you're solving last time's problem and this time's problem, and that's essentially what happened," Mitchell said.