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State Fiscal Policy

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State Fiscal Policy
Managing a state’s finances—whether working to erase a budget deficit or reaching consensus on what to do with a surplus—is challenging. But planning for fiscal threats beyond the immediate budget cycle is not only far more complex, it’s often overlooked altogether.

The Pew Charitable Trusts is working with policymakers to reimagine their approach to fiscal management, reaching beyond the budget conditions of today to plan for the risks and investment needs of tomorrow. Although many budget challenges are shared, specific needs and priorities vary from state to state. There is no single path to strengthening state fiscal management practices.

Sudden shocks such as recessions and natural disasters can severely strain state finances in the short term, especially for states dealing with chronic deficits from costs outpacing revenue. Compounding these immediate and ongoing threats are emerging trends—population shifts, technological advancements, aging infrastructure, a changing climate—that can lead to future fiscal crises. The absence of critical, long-term preparation could mean the difference between a resilient state budget and an upended one.

Although these risks loom over every state, their true cost can be obscured by one-time infusions to the budget or a lack of information about long-term liabilities, or superseded by more pressing needs. Accounting for and acknowledging these budget stressors can, however, help states avoid painful measures during tough economic times, such as raising taxes when constituents are cash-strapped, cutting key programs people rely on in a downturn, and compromising long-term obligations.

Over the past decade, states have made important progress in strengthening their long-term fiscal health. Some have embraced risk-management tactics, like regularly studying revenue volatility, stress-testing their budgets against future scenarios, and evaluating the risks and rewards of tax incentives. Meanwhile, other states have collectively amassed their largest fiscal reserves on record and have improved their retirement systems to their best condition in more than a decade, according to Pew estimates.

These improvements have established a clear picture of what is possible as states consider the health of their finances over the next decade. Pew can help states build on that success, which is supported by Pew’s track record of providing policymakers across the political spectrum with a rigorous understanding of states’ fiscal health, elevating research-driven best practices, and partnering with state officials to help fortify their state’s future. Pew aims to enable a new approach to state fiscal management, delivering to decision-makers the data, analysis, and guidance they need to face these long-term risks head-on and identify opportunities for growth.

Data Visualization

Fiscal 50: State Trends and Analysis

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Data Visualization

Fiscal 50 is an interactive platform that provides clear, data-driven portraits of state fiscal conditions. Users can view, sort, and analyze data on key trends that shape states’ fiscal health now and over the long term. Fiscal 50 also features research and analysis to help users understand how these trends interact and fit together—and how they relate to real-time developments playing out in state capitols across the country.

Article

Fiscal 50 Kicks Off Its Second Decade With a Big Update

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Article

Welcome to the new Fiscal 50. Longtime users will notice a wide range of changes in both the substance of Fiscal 50 content and how it is presented, including state trend pages, interactive indicator pages, and a Budget Threads feature that offers The Pew Charitable Trusts’ read on the latest state fiscal news.

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Report

Tools for Sustainable State Budgeting

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Report

Responsible state fiscal policy requires more than just balancing the current year’s budget. It must also include ensuring that the budget is on a sustainable path. Otherwise, policymakers cannot have the lasting impact they hope for: They may act to improve state services or cut taxes only to have to scale those efforts back later. This risk is especially high in the aftermath of the COVID-19 pandemic. Record budget surpluses, driven largely by federal pandemic aid, empowered states to adopt historically large tax cuts and spending increases from 2021 to 2023, investments that many state leaders hope to build on in coming years.

A close-up of four microphones, two each being held by two hands. The mics are directed toward a person, visible only from the chest down to the thighs, standing near a podium, wearing a blue shirt, grey slacks, and a burgundy tie. Two other microphones are also visible at the left of the image.
A close-up of four microphones, two each being held by two hands. The mics are directed toward a person, visible only from the chest down to the thighs, standing near a podium, wearing a blue shirt, grey slacks, and a burgundy tie. Two other microphones are also visible at the left of the image.

Five State Fiscal Debates to Watch in 2024

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As legislative sessions begin in statehouses throughout the country, lawmakers face a host of issues that will affect state budgets. This five-part series previews some of the most pressing fiscal questions state leaders are likely to debate in 2024.

OUR WORK

Budget Threads

Pew’s read on the latest state fiscal news

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In this regular feature, experts from The Pew Charitable Trusts highlight and add context to economic and policy developments and their implications for states’ budgets and long-term fiscal sustainability.