The problem is that these governments are treating symptoms that are largely unrelated to the cure. The real culprit for many state and local government is the ongoing (and worsening) problem with current and future liability for retirement benefits already promised (and often guaranteed by law). Laying people off, adding unpaid furloughs and cutting base pay are an immediate-term fix that does little or nothing to resolve the longer-term underlying problem -- ongoing public employee retirement obligations, including many places where new hires are still getting the same retirement deal that has already gotten these governments in real financial trouble.
Agreed-somewhat! State departments are doing what they can by instituting furloughs, closures, etc. given budgetary limits provided by the legislature. It takes an act of the legislature to make the changes you suggest. And that is a tough call-politically and morally.