Don Brunell

When an errant SUV crashes through your picture window, you may not notice that your barbecue tipped over and caught your house on fire. So it is with the U.S. economy these days.

All the focus on our national debt, sequester cuts and federal tax increases is obscuring a smoldering problem in the states. Declining tax revenues, budget deficits and underfunded pensions have legislatures scrambling for revenue. Many states are taxing and borrowing more just to make ends meet.

The State Budget Crisis Task Force, led by former New York Lieutenant Gov. Richard Ravitch and former Federal Reserve Cha...