Quarrelsome, politically hamstrung, dancing on the edge of bankruptcy: are America’s state governments becoming obsolete?

Ten states reached the end of their fiscal year June 30, deadlocked over how to deal with deficits. Illinois, for example, had a $11.8 billion shortfall, Connecticut $8.8 billion, and our once-”golden” California facing (and unable to resolve) a stunning $24.3 billion gap.

Sure, the deep national (and global) recession accounts for much of the pain. But several states, California most glaring of all, have structural deficits–requirements for legislative super-majorities, or unreformed health or welfare or corrections systems that lawmakers lack the courage to change or finance appropriately.

In the midst of all this, there’s the sideshow of gubernatorial imbroglios, highlighted by Illinois’ impeached Rod Blagojevich, South Carolina’s disgraced Mark Sanford, New York’s bitterly opposed David Paterson, and Alaska’s rashly resigning Sarah Palin. ( “Are we doomed to see them (the governors) go bonkers one by one, state by state?” asks Gail Collins in the New York Times).

The state-level theatrics and fiscal feuds reflect a potentially fatal diversion from the challenges of a globalized centurystiff worldwide economic competition, severe energy shortages, imperiled ecosystems, the specter of death-dealing floods and droughts triggered by human behavior, and more.

Brain-active states would be revamping their revenue systems, investing heavily in school reform and higher education to keep their populations–native and immigrant, rich and poor–internationally competitive. They’d be stepping up environmental protections and stopping wasteful sprawl development, while also reforming criminal justice systems to cut back on burgeoning prison populations.

Yet on most such indicators they’re not just inactive but headed downhill.

Example: States are using most of their federal stimulus transportation dollars on building and improving roads. And they’re cheating their metro areas egregiously: the New York Times reports that of the 5,274 transportation projects approved so far, the 100 largest metro areas have received dramatically less than their population share. And very little money is going to energy-saving urban public transit systems, many of which are cash-starved and in urgent need of upgrading and expansion.

For a moment, step back and ask yourself: If we were organizing the United States for the first time, right now, would we repeat our arbitrarily drawn state lines across the continent? And would we stick like glue to our existing political units–roughly 85,000 cities, towns, boroughs, counties and districts, some drawn up in the colonial mist of three centuries past?

We claim to have the world’s longest-standing democracy. But our Constitution was written by representatives from a thin string of ex-colonies whose largest city (Philadelphia) had 44,000 people. Suburbs didn’t even exist.

If you believe numbers count, the real America of 2009 is focused in its 363 metro regions, especially the 100 largest–the citistates of our modern world–which account for 65 percent of U.S. population, 74 percent of our economic output, 77 percent of our good-paying “knowledge jobs,” and 94 percent of our venture capital funding.

If we were starting again, these centers of population, global connection, present and future national economic power, would be the logical core.

OK, we aren’t starting anew. The political reality is that massive constitutional power resides in our 50 state governments. The challenge is to wake them up to serving and advancing the real–predominantly metropolitan–America of today.

One critical problem: state legislatures are still heavily influenced by rural lawmakers, even decades after the Supreme Court decreed they had to redistrict for equally populated districts. Usually more conservative, the rural representatives tend to stay in office longer, control key committees.

Plus–rural or not–legislators like to micromanage. That means less freedom to innovate, create wealth and opportunity in the metro regions that are the big economic engines–the “cash cows” producing the most tax revenue.

“Smart” states, like smart corporations, would grant autonomy–rewards, incentives for productivity–to their legal subsidiaries, the regions. In turn the regions would be invited to set goals, fashion their own tax systems, balancing property, sales and income for best results. Most critically, they’d be encouraged to merge their planning and priorities for roads and transit, housing, employment, environmental controls, so that they mesh and undergird each other.

Then the states could focus on their indispensable priorities. A lead item: to restore the quality and affordability of their community colleges and state universities. Another: to provide social safety nets, plus incentives for personal advancement, for underprivileged populations, rural or urban. And finally: to brush aside “dump the tax” movements and courageously raise taxes enough to finance forward-looking investments.

Today’s sometimes bitter state-metro feuds–for example Georgia’s obstinate refusal to let the Atlanta region tax itself for transportation improvements–would be seen as the poison they are.

But the distance is long if states are to prove they’re strong, resourceful enough to deal with the 21st century’s fast-mounting challenges.

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