From Newsweek:

It's a lagging indicator's lagging indicator, and one that could give the economy a kick in the shins just as it's getting back on its feet. Even though growth is picking up and the nation could add jobs as early as this spring, many cities and states won't hit financial bottom until as much as three years from now, which will add thousands to unemployment rolls and slow the recovery locally.

Since local governments get most of their money from income and property taxes, high unemployment and precipitous drops in real estate values take a large bite out of revenue, but there is typically a lag of between one and three years as taxes are collected on the previous year's income and property values are reassessed. And unlike the federal government, which can help to drive growth by running deficits, most state and local budgets are required to balance their budgets, meaning that layoffs, steep cuts in public services, or tax increases could be on the horizon nationwide. More here.