This brings two thoughts to mind
1. The utter inability for State economic forecasters to be conservative enough to match the reality of our recession (they have been way off estimates of tax revenue for 17 consecutive months). Failure to accurately forecast means spending cuts can't easily be reasoned over time but instead must be spur of the moment "oh crap we need to cut something or else" afterthoughts.
2. The spending restraint has been necessary. Indiana has a huge surplus largely from efficiency gains made to government and of course from the lease of the Indiana toll road. According to the budget forecasts (which are rosier than they should be as it is), without cuts made to education, State agencies etc. (again, it would have been nice if these forecasts were more accurate to allow less hasty decisions), our surplus would have quickly turned to deficit within months.
We still run this huge risk - even given current cuts. If and as revenue forecasts continue to be further off than we expect, we can expect more 'spontaneous' cuts. It is either that or lose our edge in the Midwest as the only State in the vicinity to not be in dire budget straights (relatively speaking). Risking that status, means not just risking the positive perception by businesses outside our State, but it risks the State premium credit rating as a whole.
Short of the Feds coming in and providing no-string-attached funds to States, there is no easy solution. But even if the Feds accommodated that. Does California deserve the same amount of funds per capita that Indiana does? Does an unruly child who throws tantrums when things don't go his way deserve ice cream as much as a more thoughtful child that recognizes the strength that a clam intellect can provide? IMOP, the Feds shouldn't be the spoiling parents for every State. Much in the same way that overly-simplistic Keynesian spending by the government can sometimes be for the benefit of the private sector's bad apple industries and interests over others, so does the same go for funding that the Feds spend on States.