More so than any other year in recent memory, the unenviable task facing state lawmakers returning to legislative sessions this month is all about money – and the lack of it.

With the national economy still sputtering and eating into tax revenues, the struggle to cover current spending plans, let alone budget for the future, threatens to affect all areas of government: education, transportation, social services, criminal justice.

“We’re going to be competing for dollars,” said Eddie Sissons, who lobbies for poor people’s needs at the William E. Morris Institute for Justice in Arizona.

States already saw a $17.5 billion budget gap open three months into the fiscal year that began in July, according to the National Conference of State Legislatures.

The National Governors Association said it expects state shortfalls to hit $40 billion this year. That follows a year in which budget gaps went as high as $50 billion, forcing many states to cut programs, lay off workers and dip into rainy day funds.

“What is different is a lot of the choices become more painful and more difficult, because the one-time things were already done,” Scott Pattison at the National Association of State Budget Officers noted in November.

Many states warn of cuts this year to education and Medicaid. Cities and counties in Kansas say they’ll sue the governor for cutting state aid. California’s deficit could hit a staggering $34.8 billion.

“The budget will determine the policy of this state,” said Mississippi state Rep. George Flaggs.

Large layoffs are likely, said Sandra Sims-deGraffenried, executive director of the Alabama Association of School Boards.

“We’ve got boards with their backs to the wall, systems with nowhere else to wiggle,” she said.

The budget puzzle will complicate new initiatives.

Health care tops several agendas, with Connecticut lawmakers considering ways to improve the state’s supply of nurses, including incentives for students and improved working conditions.

Maine Gov.-elect John Baldacci seeks expanded health care coverage, hoping to create a new nonprofit health insurer to boost competition. Kansas Gov.-elect Kathleen Sebelius wants her state to join others in purchasing prescriptions for the needy and elderly.

Heeding the worries of doctors, lawmakers in Florida, Nevada and Pennsylvania are looking at ways to reform the world of medical malpractice lawsuits. Doctors and insurers say costs are getting too high.

And although many states say schools must prepare for very tight budgets, others are hoping – or are being forced – to make improvements.

Voters demanded that Florida reduce the number of students in classrooms, though lawmakers are trying to figure out how. Michigan will again consider whether to increase the number of charter schools. New Hampshire lawmakers hope to pass accountability guidelines and make it easier to fire some teachers.

Pennsylvania Gov.-elect Ed Rendell wants to sharply increase the state share of funding public education to reduce local property taxes – and wants to add slot machines at race tracks to help cover the $1.5 billion cost.

Gambling also is up for discussion elsewhere, with some New Hampshire legislators pushing to legalize video lottery, and governors in North Carolina and Oklahoma both seeking a state lottery.

Connecticut lawmakers worried about new tribal casinos are seeking to repeal the law that allowed the Mashantucket Pequots to open the popular Foxwoods casino.

Lawmakers in Maine also will likely be reviewing a proposal by the Penobscot Nation and Passamaquoddy Tribe to build a $650 million casino in southern Maine. Supporters say they have collected enough signatures in a petition drive to put the issue to a statewide vote if the lawmakers don’t pass legislation making casino gambling legal in Maine.

Another much-debated form of entertainment – the bloody spectacle of cockfighting – comes up for discussion in New Mexico, the last of two states to allow it. Louisiana is the other.

“It is intentional cruelty to animals,” said Danielle Bays of Animal Protection Voters.

But in Oklahoma, where voters banned cockfighting last year, state Sen. Frank Shurden said he will introduce a bill to keep cockfighting legal in the 57 counties that voted against the prohibition.