It is easy to forget that just two short years ago California faced a $26 billion deficit and states were furloughing employees to balance budgets or raising taxes to plug holes in their fiscal picture. Today California is projecting a surplus of between $1.2 billion and $4.4 billion. Texas is benefiting from a domestic oil boom and is projecting an $8.8 billion biannual surplus. Home foreclosure capitals Nevada and Arizona are seeing housing prices surge to levels not seen since 2006. It would appear that state finances are rosy. However, the great recession has left states with deferred infrastructure maintenance, underfunded pensions and growing liabilities for other post-employment benefits (OPEBS), along with reduced revenue capacity. For example, the State of Illinois Legislature ended its session on Friday tabling pension reforms, which leaves it in the unenviable position of being the worst funded pension system of any state. These broad-based structural issues are leading to deficits that cannot be corrected by one good year of fiscal performance. In our upcoming Minute in the Market, slated to be released later today, we examine core states to determine which of them are dealing with long term structural issues and managing their balance sheets in a sustainable manner.