The Economist:

The fight to bring a little private-sector discipline to America’s public sector has begun at last
ELECTIONS, Barack Obama once said, have consequences. The Republicans’ triumph in last year’s mid-terms was seen by many as an instruction from the electorate to hack away at America’s sprawling government. In Washington, DC, that debate has gone nowhere. Both Mr Obama and his foes have produced fantastical budgets, full of illusory savings and ignoring the huge entitlement programmes. A government shutdown is looming. But look beyond the Beltway and something rather more promising is under way.
Unlike the federal government, which can borrow money to plug its budgetary gap, almost all the states are required to balance their budgets. Their revenues have been slashed by the recession; the stimulus funds that saw them through 2009 and 2010 have expired; medical costs are soaring. Tax rises remain unpopular, and so are deep cuts to important state-provided services like schools and the police. So governors are finally confronting the privileges that public-sector employees have managed to negotiate for themselves in recent decades.