As a result from the recession, over 40 states are facing budget shortfalls for the upcoming 2011 fiscal year that are as big as or bigger than this past year’s.

According to The Center on Budget and Policy Priorities, these large budget gaps, caused by the largest decline in state tax receipts on record, are causing states to struggle to find revenue needed for critical public services.

One cause the projected shortfalls is due to new gaps in states 2010 budgets. States struggle to keep a balanced budget at the mid-point of this fiscal year with a projected $35 billion in shortfalls for 41 states.

Risky recovery bets may also influence a state’s future budget. Minnesota relied heavily on using a one-time fix to close their budget gap for 2010, a bet that appears to be backfiring on the state, according to MinnPost.com. With high unemployment continuing to plague Minnesota, and most other states, revenue for the state has taken a nose-dive.

“The longest economic downturn in decades appears to be well entrenched and is manifesting itself in multi-year budget shortfalls,” said the report from the National Conference of State Legislatures, according to MinnPost.com. “Many states already foresee budget gaps in FY 2011 and FY 2012. It is hard to see when they will end.”

States will continue to see fiscal problems in the coming years too, with a projected $102 billion or 17 percent in shortfalls of the states’ budgets . The CBPP projects this gap could grow to $180 billion as revenues deteriorate.

Federal assistance has helped reduce the impact, however. The American Recovery and Reinvestment Act lessened which states need to reduce services or raise taxes.

Yet the federal assistance is likely to end before state budget gaps have been eliminated. This could be averted if the federal government phases out assistance gradually over the next few years, according to the CBPP.

Read the full report here.