To me, the real challenge for the future of news is *not* finding ways to support relatively tiny numbers of reporters to cover state legislatures and school board meetings. The problem seems to be in building an amplification apparatus that will reach a substantial percentage of the people in a given geography. There are some signs that this can be accomplished via a social news mechanism. Redditors, in particular, are getting good at pushing particular stories to popularity, like the video of a Texas judge hitting his daughter.
But social news efforts often draw on a national audience that's actually quite small in a given jurisdiction.