Economy

The nation's weak economy has landed some big states in a desperate struggle to balance their budgets before July 1 when their new fiscal years begin. Arizona, California, New Jersey, Nevada and Pennsylvania are among states that must slash spending or raise taxes to straighten out their finances. Nevada Gov. Jim Gibbons, a Republican, plans to call a special session of the Legislature next week to find a last-minute solution to a budget shortfall approaching $1 billion. The state is outspending revenue by $1 billion a month yet is nowhere near settling on a budget due in 10 days. Republican Gov. Arnold Schwarzenegger and the Democratic Legislature are far apart on what to do.

Arizona has never missed its budget deadline but is preparing for a government shutdown July 1 that could temporarily idle 30,000 state employees. Democratic Gov. Janet Napolitano and leaders of the Republican-controlled Legislature have been deadlocked over how to close a $2 billion gap between projected revenue and planned spending. The governor wants to borrow most of the shortfall, allowing schools to be built with debt rather than on a pay-as-you-go basis.

Stocks capped a difficult week with steep losses Friday amid escalating worries about the financial and automotive sectors and a rebound in oil prices. The Dow Jones industrial average gave up more than 200 points to end at its lowest level in three months. While investors have seen other triple-digit days in the past year since concerns about the economy began emerging, the Dow's first finish under 12,000 since mid-March could deal Wall Street a psychological blow.