And then, right on schedule thanks to the housing crash, the states started blowing up. First up: California

The states and local governments are going to see horrific shortfalls thanks to the housing crash. Tax revenues are going to plummet even as spending rises, causing massive budget deficits, and eventually tax increases and slashed spending.

The housing crash will bankrupt the builders, the banks and the REIC-related industries. But it may also bankrupt your state and your city, who enjoyed the free housing bubble loot when it was pouring in, but stupidly spent it like it would never end. And then it did.

Get ready. No surprises for HP'ers.

Schwarzenegger Will 'Declare Fiscal Emergency' In Weeks

Gov. Arnold Schwarzenegger said Friday he will declare a "fiscal emergency" in January to give him and the Legislature more power to deal with the state's growing deficit.

Schwarzenegger made the announcement Friday after meeting with lawmakers and interest groups this week to tell them California's budget deficit is worse -- far worse -- than economists predicted just a few weeks ago.

The shortfall is not $10 billion, but more than $14 billion -- a 40 percent jump that would put it in orbit with some of the state's worst fiscal crisis, those who have met with him said.

California is struggling with shrinking state tax revenue from the meltdown of the subprime housing market and the credit crunch on Wall Street.

State spending also has increased by more than 40 percent since Schwarzenegger took office after the 2003 recall of then-Gov. Gray Davis.