California Budget Director Michael Genest said his state was looking at a $7 billion shortfall next year, possibly more, Stateline.org reported Monday.
In Michigan, Gov. Jennifer Granholm has told state agencies to prepare for cuts of up to 20 percent in 2010.
"I have a feeling that it's going to look pretty gruesome," said Mitchell Bean, director of the Michigan House Financial Agency.
The state's economy has been in continuous decline since 2001 and now has an unemployment rate of 15.3 percent, compared with a national 10.2 percent unemployment rate.
Further west, Genest said he researched ways for California to declare bankruptcy, but could not find an option. He also considered having the state revert to territorial status, to give the financial mess to the federal government.
But that would be "impractical" he decided.