Recessions: State and Local Budget Pressures and Priorities in Challenging Times

Some effects could come soon, but policymakers face significant long-term uncertainty

Recessions: Managing the Budget Squeeze
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State governments play a fundamental role in the lives of residents by collecting taxes and then using that revenue to pay for schools, transportation, public safety, and many other policy priorities. In particularly challenging times, when revenue is volatile and priorities may need to be reassessed, it is important that lawmakers manage states’ budgets effectively to mitigate fiscal stress. Although leaders cannot control many external factors that influence state 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 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 the next recession and provides key considerations that leaders can keep in mind when making budgetary decisions. It also details fiscal and economic policy recommendations for managing effectively during unforeseen events—such as the COVID-19 outbreak—and preparing for a downturn.

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Four Steps to Reduce the Harm of State Fiscal Distress

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Four Steps to Reduce the Harm of State Fiscal Distress

Research by The Pew Charitable Trusts points to four steps that state governments can take to prepare for temporary budget distress caused by economic downturns or other adverse events, such as the coronavirus pandemic. These strategies offer a roadmap for limiting the damage caused by uncertainty and volatility.

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How D.C. Is Managing the Fiscal Implications of COVID-19

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At a late August webinar hosted by The Pew Charitable Trusts, a leader of the District of Columbia’s recent efforts discussed how D.C. has leveraged its stress testing process and adapted revenue estimation tools in this time of uncertainty.

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Rainy Day Funds Affect State Credit Ratings

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Credit ratings are critically important for state governments. A low rating may suggest to investors that a state is more likely to default on the debt it issues. That makes it more costly for a state to borrow money and adds strain to its budget. A robust rainy day fund, however, can have a significant positive impact on a state’s credit rating.

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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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