By Karen Axelton

photo laid offIf your company targets state and local governments as clients, here’s some bad news: reports that states are facing a third year of revenue shortages, leading to steep budget cuts.

As a result, many state and local governments are resorting to layoffs. Since August 2008, CNNMoney says, about 231,000 state and local government jobs have been eliminated; and in a recent survey, 19 states reported plans to implement layoffs due to budget shortfalls.

Although the private sector has shown signs of recovery and has been adding jobs, state and local economies typically lag behind the nation’s economy as a whole by about 18 months–so state and local governments are cutting, not adding.

The fiscal 2011 budget started July 1 in 46 states, and with funds for programs already cut to the bone and employees already facing furloughs and salary freezes, states are now turning to layoffs. Local governments are faring even worse as they lose state aid and tax revenues from formerly employed workers.

What does it mean to you? If your business has relied on state and local government contracting, you need to seek additional sources of revenue–whether in the private sector or by offering lower-cost services to help state and local governments deal with their shortfalls.