In a remarkable gathering in Philadelphia on Tuesday, 48 of the nation’s incoming governors met with President-elect Barack Obama in the hopes that the federal government would throw them a budgetary lifeline.

Forty-one states face deficits this year or next because of the economy’s steep decline. Washington state and Idaho are included in that group, with Gov. Chris Gregoire facing a $5.1 billion hole and Gov. Butch Otter trying to make up approximately $130 million. And those numbers will probably worsen.

Most states have constitutional mandates to balance their budgets. So they can raise taxes, cut spending or do both, but they must act quickly. What they can’t do is carry deficits like the federal government.

Virtually every state was caught off guard by the magnitude of the downturn. The question now is whether the federal government should focus on the deficit or stimulate the economy and help them out.

The U.S. deficit is not trivial. It could easily top $1 trillion after the bailout receipts are added up, but most economists agree that the economy could plunge even deeper if the federal government doesn’t produce a robust stimulus package.

That looks to be the best of two unattractive choices, but even then governors and legislators have to demonstrate they are willing to make the hard choices that lead to service cuts and layoffs.

Gregoire has already frozen most hiring and ordered a 1 percent spending reduction across all agencies, with some exceptions. Another $2.7 billion in program cuts is being considered, including $1 billion for education.

The state’s higher education institutions have been told to pare budgets by 20 percent over the next two years. Today, the state will begin dropping clients from the Basic Health Plan, with 7,700 people losing coverage by July.

In Idaho, Otter has ordered 3 percent budget cuts across state agencies and asked them to deposit another 2 percent into reserves.

The Obama team and governors seem to agree that spending on infrastructure projects – roads, sewers, bridges, etc. – would trigger desperately needed economic activity. The key is to make sure funding is steered toward “shovel ready” projects, so that the economy gets quick injections of cash. Many states have produced such lists and are eager to get them funded.

Medicaid, which is paid for by states and the feds, is another area of concern. If states cut their allocations, then the feds will cut their matching amounts. As a result, more people will go without care until their medical conditions are serious and more expensive to treat. There is no ducking that ultimate cost, so it would be wise for the feds to kick in more for Medicaid until the economy turns around.

To borrow a phrase from the presidential campaign, the federal government needs to spread the wealth around.

The states are well-positioned to make sure the money is wisely spent while the most vulnerable residents are not abandoned.