Job security was one big reason Mark Williams quit the construction industry last year after two decades and went to work for the Connecticut Department of Transportation.

The 43-year-old Mr. Williams coordinated emergency services responding to highway accidents. Earning $15 an hour, he was bringing home $20,000 less a year than in construction. But he liked the work and his colleagues, and the benefits and steadiness of the job added to its attraction.

Then, on Jan. 17, he was laid off after just seven months on the job. "I wanted a place I could retire from and take care of my family," he says, "and I'm running out of time to do that." He is worrying about health-insurance coverage for his wife, his son and himself, as well as paying his son's tuition at the University of Connecticut. He is searching, he says, for "basically anything with benefits."

Tens of thousands of workers in state and municipal governments will soon find themselves in a similar fix. More than 40 states and countless local governments are confronting the worst budget crisis since World War II, primarily due to a drop in tax revenue on the heels of the stock-market plunge. Many are warning that jobs will be cut or privatized to close gaping budget gaps. As Springfield, Mass., Mayor Michael J. Albano, who is eliminating 400 jobs, said at a news conference recently, "I've never seen anything like this."

Budgets are still winding their way through legislatures and city councils, so many governments haven't settled on a final number. According to a survey released last week by the Denver-based National Conference of State Legislatures, which said state budget gaps were growing "at an alarming rate," eight states have initiated layoffs this year.

Connecticut, for example, has issued about 3,000 layoff notices, and could send out some 850 more by the end of June. Florida Gov. Jeb Bush has proposed cutting nearly 3,000 positions in his state. California has said it will eliminate 10,000 vacant positions and lay off 1,500 workers, with more cuts possible.

In all, as many as 150,000 state and local employees could lose their jobs over the next several years, or roughly 10% of the 1.5 million such workers added since 1998, estimates Adrian Moore, vice president of research at Reason Public Policy Institute, a Los Angeles think tank.

The cuts could presage a major shift in the way workers view jobs in state and local government, which had been steadily expanding since the 1930s. Many of these positions offer generous pay and benefits as well as union protection. There are currently about 18.6 million state and local government workers, compared with 2.6 million federal employees, and the latter group actually shrank during the 1990s as jobs were privatized and politicians saw political benefits in restricting the number of federal workers. Meanwhile, the number of state and municipal employees grew by nearly 20% during the flush 1990s.

That is now changing. Paul Light, a professor of public service at New York University, notes that the rhetoric of governors toward state and local employees is now "sharply negative." Says Prof. Light: "In the past, it's been rare for state and local governments to use any reduction in force or attrition to reduce payroll." But this generation of governors "went to school on Bill Clinton. What Bill Clinton showed was that if you can say your government work force is smaller than when you got there, you can raise taxes and increase revenues and get away with it."

To Connie Stringer, a 58-year-old executive secretary in California's technology, trade and commerce agency, it is a far different atmosphere than when she became a state employee 18 years ago. Back then, she says, working for the state was "great. We got regular pay raises. The public seemed to have more respect for us."

Recently, though, Ms. Stringer learned her position would be eliminated in May. She is trying to transfer to another agency. But if that doesn't work, she plans to retire, start taking a pension and seek temp work to try to make up the income gap. She can't afford not to work, she says, especially with her husband on Social Security disability. The Stringers are already cutting back on movies and dinners out and have given up their cellphone, canceled their daily newspaper subscription and cable TV and given away their computer to avoid the temptation of wasting time, and money, online. "We think about all these things now," says Ms. Stringer.

Among workers she knows, she says, "There's a lot of anger, a lot of frustration." Even among the workers who are keeping their jobs, she says, some feel threatened by talk of salary freezes and unpaid time off. "I would not recommend working for the state," she says. "It's not a safe and secure place anymore."

Recruiters warn that many government workers like Ms. Stringer face huge challenges in the job market, which already has been flooded with workers with similar skills who have been laid off from the private sector. "It's just not promising for these people," says Jeff Hawn, a managing partner in the Columbus, Ohio, office of Princeton Search Group/MRI.

Mr. Hawn says most companies prefer to hire workers with private-sector experience, especially those who possess needed skills and a willingness to take a pay cut, over government veterans trying to make a transition to a new field. "Right or wrong, I think there's a perception that people working in government -- because they don't have responsibility for profit and revenue generation -- don't work with the sense of urgency of people in the corporate world," he says.

Layoffs aren't the only threat to workers. Some governments are privatizing jobs, or modifying the protected status of civil-service workers. Two years ago, for instance, Florida eliminated certain collective-bargaining rules for some state employees, with the effect that these workers can be laid off without regard to seniority.

Such changes can damage employees' confidence, says Mollie Anderson, director of Iowa's Department of Personnel. "In Iowa, we feel that when you take away a person's security, their ability to be productive is sometimes negatively affected." Last year, the state laid off 198 employees, and Ms. Anderson said more layoffs could come in the fiscal year beginning July 1.

The cuts also threaten services, some workers say. Last month, when 286 workers were cut from the Oregon State Police, out of a staff of 1,108, the agency was left with only one expert to examine ballistics. "It's hard to try to explain how crazy that is," says Katie Harding, 27, who was laid off from her $27,000-a-year position as a lab technician. Just last month, Ms. Harding, who studies ballistic markings on bullets and shell casings, was able to link two homicides for the first time in her career.