Economic Downturns: Protecting State and Local Budget Priorities in Challenging Times

States have been hit unevenly, but all face long-term uncertainty

Economic Downturns: Protecting State and Local Budgets
Last Updated May 11, 2021
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State governments play a fundamental role in the lives of residents by collecting taxes and using that revenue to pay for schools, transportation, public safety, and other policy priorities. In particularly challenging times, when revenue is volatile and priorities may need to be reassessed, it is important that lawmakers manage budgets effectively to mitigate fiscal stress. Although leaders cannot control many external factors that influence state and local fiscal health—such as global economic conditions, federal policies, or demographic changes—they do decide how to react to those events. And these actions can help determine whether a state or locality remains fiscally sound.

In this series of publications, experts at The Pew Charitable Trusts examine how state leaders are reacting to the current fiscal landscape. Each explores the limits that states face when preparing for fiscal stress and provides key considerations for leaders making budgetary decisions. The series also details fiscal and economic policy recommendations for managing effectively during unforeseen events—such as the COVID-19 pandemic—and preparing for future uncertainty. 

State Tax Revenue Passes a Recovery Milestone
State Tax Revenue Passes a Recovery Milestone
Article

State Tax Revenue Passes a Recovery Milestone

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Article

For the first time since COVID-19 sent state finances into a tailspin, tax revenue has grown enough to erase its initial pandemic losses in a majority of states, and total collections nationwide were poised to do the same.

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DC memorial
Article

States' 2020 Personal Income Growth Was Highest in 20 Years

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Every state experienced an uptick in total personal income last year as historic gains in unemployment benefits, federal aid, and other public assistance drove the sharpest annual growth in two decades. Without government support, most states would have sustained declines in personal income—a key economic indicator—as the COVID-19 pandemic took a toll on business activity.

School buses line and parked at DPS- Hilltop Terminal in Denver, Colorado on Tuesday. November 10, 2020.
School buses line and parked at DPS- Hilltop Terminal in Denver, Colorado on Tuesday. November 10, 2020.
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How States Can Use Federal Stimulus Money Effectively

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Just months ago, many states feared their budgets might face shortfalls for years because of the COVID-19 pandemic. But now most could have temporary surpluses after President Joe Biden signed the American Rescue Plan Act (ARPA) into law in March.

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Restaurant worker cleaning
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Incentive Evaluations Limit Fiscal Doubt and Improve Effectiveness

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Even as the pandemic forced states to shift their policy priorities and grapple with the economic downturn during the 2020 legislative session, governments continued to enact major reforms to economic development tax incentives.

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States of Innovation

Data-driven state policy innovations across America

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Data-driven policymaking is not just a tool for finding new solutions for difficult challenges. When states serve their traditional role as laboratories of innovation, they increase the American people’s confidence that the government they choose—no matter the size—can be effective, responsive, and in 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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