The Wall Street Journal's tax report points out that states are expecting slow revenue growth this year.

This is a particular worry for New York State, where tax revenues are disproportionately driven by Wall Street bonuses. I recently interviewed the business manager for an upstate school district as part of a story I was working on, and he's really worried about what's going to happen to the district's finances, which are heavily dependent on state aid. Eliot Spitzer had used some of the state's recent Wall Street windfall to try to put some stability into the level of state school aid, but with the subprime problems, he said he'd be thrilled if next year's aid doesn't fall.

This is part of a broader story about how volatile state earnings are becoming. New York State's finances are basically tied to the health of a single industry, while California's are hostage to the fortunes of two. Two of the three biggest states in the country are turning a slightly larger version of the Company Town.

One would argue for federalism, except that our federal tax receipts seem increasingly to be driven by the same few engines. Finance, entertainment, and technology throw off such massively disproportionate profits, and salaries, that problems in those sectors can easily engulf success in a hundred other less volatile industries.

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