Fiscal 50: State Trends and Analysis

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States Encounter Uneven Personal Income Growth as Aid Subsides

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As federal aid to pandemic-stricken families and businesses has receded, income from workers’ wages and salaries is playing a larger role in sustaining states' personal income growth.

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States’ Prime-Age Employment Rates Are Still Recovering

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A greater share of prime-working age Americans were employed in 2021 than a year earlier as the economy continued to recover from dramatic losses early in the COVID-19 pandemic.

Pew’s Fiscal 50: State Trends and Analysis presents 50-state data on key fiscal, economic, and demographic indicators and analyzes their impact on states’ long-term fiscal health.

States’ Fiscal Prospects Brighten as Recovery Progresses

After an initial jolt to state finances, stronger-than-expected tax revenue growth and unprecedented federal aid have lifted states’ outlooks. Many economists had predicted a dark chapter for state budgets when the coronavirus pandemic triggered a historic contraction in the U.S. economy in early 2020, abruptly ending the longest U.S. economic expansion on record. But the recession proved to be the shortest on record and most states now enjoy surprisingly strong fiscal conditions, though rising inflation, international turmoil, and the unpredictable course of the pandemic pose continuing threats.

A hallmark of the pandemic economy has been its divergent effect on state tax revenue. During the eight quarters ending June 2021—the last two budget years for most states—nearly half of states not only took in enough tax dollars to offset their initial pandemic losses, but collections in those states also outperformed their pre-pandemic growth trends. Still, receipts lagged pre-coronavirus growth trends nationwide and 12 states had yet to take in enough tax revenue to recoup their initial losses, much less catch up to their pre-pandemic trends.

Robust federal aid has played a central role in supporting the economy and state finances. Federal assistance for taxpayers, businesses, and state and local governments—along with higher-than-expected tax collections—helped alleviate stress on budgets and allowed the majority of states to avoid tapping their rainy day funds. In fact, after dipping briefly in fiscal year 2020, the total amount set aside in rainy day funds nationwide grew to a new high by the end of fiscal 2021.

States’ economies have generally experienced steady growth in recent years despite the pandemic’s disruption. The national rate of adults in their prime working years who held jobs was nearing pre-pandemic levels in early 2022. Every state recorded an annual increase last year in total personal income from all sources, another key economic indicator. Earnings from work, which experienced the sharpest growth in over two decades, drove much of the gains. Pandemic-related government assistance to individuals and businesses also contributed, although much of the aid has since subsided.

Tax revenue

Tax Revenue in 21 States Outperformed Pre-Pandemic Growth. In a remarkably fast recession turnaround, tax revenue in nearly half of states has not only recouped its initial losses from the downturn, but also outperformed its pre-pandemic growth trends when receipts from the past two fiscal years are combined. Temporary factors played a major role in these unexpected gains, but they don’t fully explain a surge of budget surpluses. View the indicator or print the analysis(Last updated March 10, 2022)

Reserves and balances

Budget Surpluses Push States’ Financial Reserves to All-Time Highs. After an early pandemic decline, states had collectively amassed their largest fiscal cushion on record by the start of the current budget year. Higher-than-expected tax revenue—among other temporary factors—drove the total held in savings and leftover budget dollars to new highs. As states approach the close of fiscal year 2022, most expect to spend down at least a portion of their surplus funds. View the indicator or print the analysis. (Last updated May 9, 2022)

State Personal Income

States See Gains in 2021 Personal Income, But Growth Varies. Every state experienced personal income growth in 2021 as the economy continued to rebound from severe losses earlier in the pandemic. Earnings from work drove much of the gains, recording the steepest annual rate increase in over two decades. Federal aid and other public assistance further contributed to the growth, climbing from 2020’s elevated levels. Total growth ranged from more than 5% in Idaho and South Dakota to nearly zero in Vermont, after accounting for inflation. View the indicator or print the analysis. (Last updated May 12, 2022)

Employment-to-Population Ratio

States’ Prime-Age Employment Rates Are Still Recovering. Employment rates for Americans in their prime working years have been recovering since they fell in every state after COVID-19 abruptly derailed the economy almost two years ago. But the share of 25-to-54-year-olds who were employed on average in 2021 still lagged pre-pandemic levels in all but two states—Georgia and Montana—as businesses struggled to fill open positions. View the indicator or print the analysis(Last updated March 10, 2022)

Long-running challenges complicate recovery

The coronavirus pandemic intensified two challenges already facing states: It put pressure on Medicaid, the health care program that is most states’ second-biggest budget expense, and introduced a novel source of volatility that triggered unexpected swings in tax revenue, upsetting policymakers’ plans for balanced budgets.

Meanwhile, states continued to face fiscal pressures from inherited shortfalls in funding for public employees’ pension and retiree health care benefits; recurring deficits between annual state revenue and expenses; and weak population growth, which can diminish economic prospects and revenue collections.

One lifeline for states continued to be federal dollars, which made up roughly one-third of all state revenue before the latest economic shock led to a boost in federal aid to states.

State Medicaid Spending

States Collectively Spend 17 Percent of Their Revenue on Medicaid. Medicaid consumed a greater portion of states’ own money in nearly every state between fiscal 2000 and 2017. States’ increases varied widely, however, from less than 1 cent to nearly 12 cents more per dollar of state-generated revenue, exerting different degrees of budget pressure. Medicaid’s claim on state revenue surged in the wake of the Great Recession, after temporary federal economic stimulus dollars expired but before the federally funded expansion of Medicaid eligibility began, and has remained stable since. Medicaid is most state governments’ second-biggest expense, after K-12 education. View the indicator or print the analysis. (Last updated January 9, 2020)

Tax revenue volatility

Volatile State Tax Collections Make Budgeting Difficult. All states experience swings in their tax revenue from year to year, but some fluctuate more than others, leading to surprise shortfalls or windfalls that can make it hard for policymakers to manage budgets. During the 20 years ending in fiscal 2020, Alaska recorded the greatest volatility and South Dakota the least, after removing the effects of state tax policy changes. Taxes on oil and mineral extraction and corporate income were consistently more volatile than other major tax streams. In early 2020, the coronavirus pandemic introduced another dose of volatility as tax revenues took their steepest plunge during a single quarter in at least 25 years. View the indicator or print the analysis. (Last updated October 14, 2021)

Debt and Unfunded Retirement Costs

Long-Term Obligations Vary as a Share of State Resources. 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. View the indicator or print the analysis. (Last updated May 17, 2016)

Fiscal Balance

Before Pandemic, Spending Exceeded Long-Term Revenue in 8 States. Most states amassed sufficient revenue between fiscal years 2005 and 2019 to cover all their expenses, despite the Great Recession’s blow to state finances. But in eight states, revenue collected from taxes, federal funds, and other sources fell short, pushing off to future taxpayers some past costs for operating government and providing services. States can withstand periodic deficits without endangering their fiscal health over the long run. But chronic shortfalls are one indication of a more serious, unsustainable structural deficit in which revenue will continue to fall short of spending absent policy changes. View the indicator or print the analysis. (Last updated November 15, 2021)

Population Change

A Third of States Lost Population in 2021. Population growth over the 2010-20 decade slowed nationally to a rate not seen since the Great Depression, and the COVID-19 pandemic amplified this long-term trend. Annual growth was approximately five times slower in 2021 than over the preceding 10-year period. Population in 17 states shrank over the year, including Illinois, Mississippi, and West Virginia, the three states that also lost residents over the 2010s. Growth over the decade and in 2021 was especially sluggish in the Midwest and Northeast as people continued to move to Southern and Western states. Population trends are tied to states’ economies and government finances and are therefore useful for understanding both. View the indicator or print the analysis. (Last updated April 25, 2022)

Federal Share of State Revenue

2019 Federal Share of State Revenue Remains Stable. The federal government is the second-largest source of state revenue—accounting for 31.4% of the total in fiscal 2019—a share that is expected to grow in the aftermath of the COVID-19 pandemic, which led to an influx of federal aid. But states’ reliance on federal funds varies widely, ranging from 20.1% of revenue in Hawaii to 44.8% in Louisiana. The share of states’ revenue made up by federal dollars in fiscal 2019 was among the largest on record. View the indicator or print the analysis. (Last updated December 22, 2021)

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Agenda for America

Resources for federal, state, and local decision-makers

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Data-driven policymaking is not just a tool for finding new solutions for emerging challenges, it makes government more effective and better able to serve the public interest.

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Fiscal 50

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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.

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‘Lost Decade’ Casts a Post-Recession Shadow on State Finances

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Issue Brief

‘Lost Decade’ Casts a Post-Recession Shadow on State Finances

Nearly 10 years after the end of the Great Recession, state governments have put the worst behind them. But the deepest downturn since World War II also has lived up to early predictions that states would face a “Lost Decade” because of missed economic and revenue growth.

Where States Get Their Money, FY 2019
Where States Get Their Money, FY 2019
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Where States Get Their Money, FY 2019

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Taxes and federal funds together account for 80.5% of revenue for the 50 states. Taxes are the largest revenue source in 46 states, while federal funds are greatest in four: Alaska, Louisiana, Montana, and Wyoming.

How states raise their tax dollars
How states raise their tax dollars
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How States Raise Their Tax Dollars, FY 2020

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Taxes make up about half of state government revenue, with two-thirds of states’ total tax dollars coming from levies on personal income (36.5%) and general sales of goods and services (32.2%).