During the worst days of the recession, many warned of coming catastrophes in state and local governments, whose massive revenue losses were supposed to force draconian cuts in employment and services. Only Federal aid could avert disaster in America’s states and cities.Maybe Washington should hold on to its money. A new story in USA Today reports that cities and states have actually weathered the recession fairly nicely, even taking into account the recent drop in Federal stimulus money.According to the report, states have managed to stabilize their financial situations mainly through cutbacks in overburdened services. Contrary to fears, these cuts have not been draconian: USA Today estimates that state spending is down by only 1.2 percent on average. With rising tax revenues helping to boost budgets even higher, it looks like most states will be able to avoid the predicted catastrophe without resorting to money from Washington. For all the worrying during the height of the recession, state solutions to the crisis have been rather simple. Modest, thoughtful change and a bit of common sense can make a big difference. The states facing the biggest problems are those with powerful, entrenched interest groups and dysfunctional political cultures.There are some more serious long-term issues—namely pension costs, often off the books, and runaway medical costs. But in the short term, the states seem to be managing their affairs rather well. Maybe they could teach the folks in Washington a thing or two.