Fiscal 50: State Trends and Analysis, an interactive resource from The Pew Charitable Trusts, allows you to sort and analyze data on key fiscal, economic, and demographic trends in the 50 states and understand their impact on states’ fiscal health. Read the key findings below.
Insights From Fiscal 50’s Key Measures of State Fiscal Health
November 1, 2016
Recovery from the Great Recession is slow and uneven
States’ fiscal conditions have improved since the Great Recession ended more than seven years ago, but their recoveries are incomplete. Nineteen states still collect less tax revenue than at their recession-era peaks, after adjusting for inflation, and most have yet to rebuild their financial cushions to pre-recession levels. In addition, 18 states’ employment rates trail 2007 levels. Despite these challenges, personal income in all states has bounced back above pre-recession figures, though growth has fallen short of historic norms.
Tax revenue. Nationally, total state tax revenue recovered in mid-2013 from its plunge during the recession. But state to state, the recovery has been uneven due to differences in economic conditions as well as tax policy choices. Tax collections in 31 states were higher in the first quarter of 2016 than at their peaks before or during the downturn, after adjusting for inflation. States with below-peak tax revenue still have less purchasing power than they did more than seven years ago.
Reserves and balances. States have only partially rebuilt their financial cushions after tapping them to plug budget gaps during the recession. At the end of fiscal 2015, only 19 states could cover more government expenses using rainy day funds and general fund balances than they could have in fiscal 2007, just before the recession. Three states had less than a week’s worth of reserves set aside for budget shortfalls.
Employment-to-population ratio. Despite a U.S. economy that has added jobs each month for six years, no state could boast that its core labor pool had fully recovered from the Great Recession as of the year that ended in June 2016. The share of prime-working-age adults (ages 25 to 54) with a job remained below pre-recession levels nationally and in 18 states. Employment rates for this population were lower than in 2007 in another 30 states and higher in two, but not by statistically significant amounts, so the results were inconclusive.
State personal income. Personal income in all states is back above levels seen at the Great Recession’s onset, signaling a widespread U.S. economic recovery. But growth since the start of the recession has varied, ranging from the equivalent of less than 1 percent a year in Nevada to almost 5 percent a year in North Dakota. Six states—Alaska, North Dakota, Oklahoma, South Dakota, West Virginia, and Wyoming—lost some of their post-recession gains over the year ending in the second quarter of 2016.
Over the long term, additional challenges await states
Even after overcoming the effects of the recession, states face financial pressures that will shape budgets now and for years to come. A major issue for a number of states is how to cope with an accumulation of unfunded public pension and retiree health care liabilities, which total more than $1.5 trillion nationwide. Other challenges include rising Medicaid costs, volatile tax revenue, and uncertainty about federal funding levels.
Debt and unfunded retirement costs. Unfunded pension benefits were the largest, most prominent, and fastest-growing of a selection of future costs facing states as of 2013. States reported $968 billion in unfunded pension costs—the equivalent of 6.9 percent of 50-state personal income, as well as $587 billion in unfunded retiree health care liabilities (4.2 percent of personal income) and $518 billion in outstanding debt (3.7 percent). If not properly managed, these costs can limit future budget flexibility and raise borrowing costs.
State Medicaid spending. The share of states’ own money spent on Medicaid grew in all but two states—New York and North Dakota—between fiscal 2000 and 2014. States’ increases varied widely, from less than 2 cents to about 8 cents more per dollar of state-generated revenue, exerting different degrees of budget pressure. Medicaid is most state governments’ second biggest expense, after K-12 education.
Tax revenue volatility. Some states experience greater swings in tax revenue from year to year than others do, leading to surprise shortfalls or windfalls that can make it hard to manage budgets. Alaska experienced the greatest volatility over the past two decades and South Dakota the least, after removing the effects of tax policy changes. Taxes on corporate income and oil and mineral extraction were consistently more volatile than other major tax streams.
Federal share of state revenue. The federal government is the second-largest source of state revenue—accounting for 30.8 percent of the total in fiscal 2014—meaning that federal budget decisions also play a key role in state budgets. But states’ reliance on federal funds varies widely, ranging from about 17 percent of revenue in North Dakota to almost 41 percent in Mississippi. The share of states’ revenue made up by federal dollars was largely unchanged in fiscal 2014 even as expanded Medicaid grants began to flow to some states.
Click here for a printable version of this analysis.
Pew’s Fiscal 50: State Trends and Analysis is an interactive tool that allows you to sort and analyze data on key fiscal, economic, and demographic trends in the 50 states and understand their impact on states’ fiscal health. With this tool, you can:
Compare states over time, with each other, or with national trends.
Gain insights into each state’s long-term financial well-being.
Read analysis from Pew experts.
The primary objective of Fiscal 50 is to provide insights into states’ long-term fiscal health on a range of metrics. This tool is not meant to be a comprehensive assessment of a state’s finances or a replica of state budget statistics that are published by a variety of experts. Rather, Fiscal 50 selectively presents data and analyses that help states look beyond their current budgets, size up their progress over time, consider different ways to measure performance, and easily compare their outcomes with neighbors or peers that have similar resources and challenges.
This resource will be updated regularly with more analysis, fresh data, and additional indicators.
How are the indicators chosen?
Fiscal 50 identifies five core areas that are essential to states’ fiscal health: revenue, spending, economy and people, long-term costs, and fiscal policy. Indicators for each of these are selected with states’ long-term financial well-being in mind. Pew solicited advice from outside fiscal experts in choosing them.
Where do the data come from?
Fiscal 50 builds on data from U.S. government agencies, the Nelson A. Rockefeller Institute of Government, the National Association of State Budget Officers, the National Governors Association, and Pew’s own research. Differences can be expected between certain fiscal data used in this analysis and data compiled and used by states for budgeting purposes. Statistics featured in Fiscal 50 are the best available for drawing fair comparisons across states.
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