With the economy in a slide and the credit markets seized up, states are slashing budgets, eliminating jobs, putting major construction projects on hold and nervously waiting to see whether their pension funds recover.

They also are weighing lawsuits against Wall Street firms. And at least one state -- California -- may ask Washington to come to the rescue.

Gov. Arnold Schwarzenegger warned he might have to beg the federal government for a short-term loan to cover operating costs for schools, nursing homes and police if the nation's most populous state is unable to borrow a short-term $7 billion on the credit market.

Several states -- including New York, Massachusetts, California and Illinois -- are beefing up tax enforcement and collection efforts as they face widening budget deficits.

Dozens of states are expecting big drop-offs in revenue and pension-fund losses, and they are making another round of emergency spending cuts on top of deep cutbacks earlier in the year, when the economy began softening and the mortgage crisis started to unfold.

"I think everybody agrees: The iceberg is in sight," said Murray Levy, a Maryland state lawmaker.

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New York, the capital of the nation's financial industry, is grappling with the highest unemployment rate since the Sept. 11, 2001, terrorist attacks and a $1.2 billion deficit that could balloon to $2 billion by the end of the fiscal year March 31.

"We're going to have to take drastic action," Gov. David Paterson said.

In Massachusetts, Gov. Deval Patrick might ask state lawmakers for the power to make midyear cuts to close a $223 million budget gap. Massachusetts also saw its pension fund shrink by nearly $4 billion in September alone to about $46 billion.

States such as Massachusetts, Indiana, Washington, Pennsylvania and Colorado are either putting a freeze on hiring or hoping to reduce their payroll through attrition.

Transportation projects and other capital spending have taken a hit because the crisis has made it difficult to borrow money on the bond market.

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In Missouri, plans to repair the St. Louis airport and fix 802 of the state's worst bridges have been delayed or scrapped. So has an expansion of Minnesota's 911 system. The crunch also threatens the building of schools in Connecticut and prison construction in Iowa.

Massachusetts successfully sold $750 million in bonds to pay state bills this week, but only after twice delaying the sale because of the paralyzed credit market.

In some states, the fiscal woes have bubbled over into anger and threats of lawsuits.

West Virginia's governor has asked his staff to research possible legal action after the state suffered deep losses in pension funds with holdings in Wall Street players such as AIG, Fannie Mae, Freddie Mac, Lehman Brothers, Merrill Lynch and Washington Mutual.

"I want somebody to pay," Gov. Joe Manchin III said. "It's outrageous. We should be looking at the people who walked away with the money."

New Jersey investment chief William Clark said the state pension board is considering legal action against Lehman Brothers after the state bought about $180 million of Lehman stock in June and sold it for a loss of about $100 million.

The attorneys general in Connecticut and other states are investigating investment banks for alleged misleading and deceptive statements regarding sales of mortgage-backed securities. Connecticut also sued three of the nation's leading credit rating firms, accusing them of giving artificially low ratings to cities and towns.