Cash-Strapped States Face Tough Choices

Across the country Americans are getting a big dose of budget reality. In a busy San Francisco medical clinic financed largely by taxes, the start of the state government's fiscal year today is filled with uncertainty as CBS News correspondent John Blackstone reports.

Dr. Katrina Liu knows her low income patients are likely to suffer as California runs out of money to pay its bills.

"These are families born to the working poor. Who either cannot afford private insurance or it's not offered to them at the workplace," says Liu.

There are worries that drastic cuts expected in the state budget are likely to take away medical insurance for thousands of low income families. And that's just the start of the pain.

State workers marched on the capital today as many were ordered to take three days off each month without pay.

As early as tomorrow California will start paying bills with IOUs - a promise to pay with interest once the budget is passed.

"Each day we wait the problem is getting bigger, the deficit is getting bigger," says California Governor Arnold Schwarzenegger.

California is not alone in its deep budget dilemma. It is one of 18 states plus the District of Columbia starting the fiscal year today with a budget deficit. Together the states are short a whopping $57.7 Billion.

Until Pennsylvania agrees on a budget, state workers will lose 30 percent or more of their paychecks starting July 17th.

As hard as the budget decisions are for lawmakers, the impact of the cuts will be even more painful for all those who depend on government spending.