Arizona, California, Florida, Michigan, and Rhode Island currently are suffering the most from worsening U.S. economic problems, but Connecticut, New York, New Jersey and other states will soon be in the same boat, a leading state policy research center says.

Gov. Arnold Schwarzenegger will meet with legislative leaders Wednesday to try to find ways to fill an immediate hole in this year’s budget that could be as large as $5 billion, according to estimates from Senate Leader Don Perata, D-Oakland. Perata said the deficit could swell to $15 billion or more by the middle of next year.

At the close of a hearing in San Francisco, U.S. District Judge Thelton Henderson promised a ruling later this week and left little doubt about its contents: an order requiring state prison officials to turn over $250 million to a court-appointed overseer to begin construction in February on the first of eight planned new medical facilities for about 10,000 prisoners.

Immediate action is needed to address falling tax revenues, possible difficulty in getting short-term loans and an expected judicial order to spend billions on prison healthcare, officials say.

Sen. Dean Florez, D-Shafter, has proposed that the California Public Employees' Retirement System purchase the state's looming debt. The money would keep California operating – including paying state employee payroll and funding schools – into next year. Florez outlined the plan in a letter to state Treasurer Bill Lockyer on Friday. Lockyer spokesman Tom Dresslar on Monday said his boss will also float the idea to the California State Teachers' Retirement System. Lockyer sits on the boards of both funds.