Let’s face it: The financial picture stinks for local and state governments, who are not only continuing to experience shortfalls in revenue but are finally beginning to pay the tab for irresponsible and not easily changeable spending commitments.

The pensions of public employees, including teachers, may bankrupt a number of states and localities even if the economy picks up soon. The huge and unfunded liabilities from health care reform will also begin to hit state budgets hard. Indeed, I’m not sure why public employee unions, including teacher unions, backed the bill so enthusiastically because it will inevitably come at the expense of state spending in other areas. Since health and education are the two biggest state budget items, a big increase in state health spending without rapid economic growth driving up public revenues will result in enormous pressure on education budgets. Things are going to be very tough for education spending going forward.

But there is a silver lining to this very dire situation: tight budgets improve the odds for serious education reform. Traditionally, education reform has been “purchased” with big spending increases for traditional education interests. (The DC voucher program, to take one example, was won only after promising to pour even more millions into the traditional public schools than were poured into vouchers.)

Unfortunately, the price of reform has almost always been too high. Public schools could almost always get a ton more money without having to make any concessions to reform, so it would take truck-loads of money to get public schools to grudgingly tolerate even the weakest reform.

Those days are over and the price of reform has just come down a lot. State and local politicians who have no interest in vouchers or charters, per se, will suddenly become very enthusiastic about any proposal that helps them figure out how to pay pension obligations without huge layoffs, giant tax increases, or bankruptcy.

Some localities are taking extraordinary actions, like outsourcing the police department, just to make ends meet. A similar desperation will soon hit education policy as state and local officials realize that the economy will not pick up fast enough and the feds will not always come to their rescue.

Jay P. Greene (Ph.D., Harvard University) is the endowed professor of education reform at the University of Arkansas.