COVID-19 is a Budget Challenge for States—But There Are Solutions

As the impacts of COVID-19 continue to reach communities across the country, significant shifts in federal, state, and local budgets are forcing policymakers to grapple with sharp reductions in revenue and the changing needs of the people they serve. Although the importance of relying on research data and evidence in policymaking has been proved in times of prosperity, it is critical in the face of a global recession. The Results First Initiative was born out of the last major shock to the global economy: the 2008 recession. As states and counties seek to make informed decisions about spending to realize better outcomes during the current economic downturn, the initiative provides a framework for allocating limited resources. Specifically, it highlights tools that states can use to make smarter budget decisions at a time of rapidly declining revenue.

Results First Clearinghouse Database (program assessment)

By April 2020, social distancing became the norm, initial jobless claims hit historic levels, students engaged in virtual learning, and the main focus of the U.S. health care system turned to keeping one step ahead of the coronavirus pandemic. In short, the needs of communities across the country shifted dramatically in a short period of time.

What can policymakers do to respond to these changing needs? A key step is to assess the variety and quality of programs that a state funds. This can help ensure that—in the midst of a rapidly changing economy—currently funded programs can still deliver the outcomes any given population requires. The Results First Clearinghouse Database brings together information from nine national clearinghouses, providing government officials with an easy way to access and understand evidence that supports public health and other critical social programs. Those charged with making difficult decisions about which programs to expand—and which to cut—can use this resource to determine how to maximize the effectiveness of state dollars and ensure that programs reach those in need.

Tools for budget development

In addition to the clearinghouse database, there are other effective tools that states can use to inform their budget decisions. Two approaches to evidence-based budget development are:

1. Prioritizing services and programs with strong evidence of effectiveness. Instead of considering across-the-board cuts, states should give priority to sustaining funding for programs with strong evidence of effectiveness. By minimizing spending reductions in areas where performance data shows improvements in desired outcomes, states and localities can mitigate some of the disruptions to programs that arise from less targeted budget cuts.
2. Using cost-effectiveness and cost-benefit analysis when possible. Cost-benefit analyses, where available, provide valuable information to policymakers seeking to identify programs with the biggest return on investment. In the unprecedented policymaking environment created by COVID-19, decisions in the near term tend to eclipse long-term thinking because what’s happening on the ground often demands immediate attention. It is still important, however, that policymakers tailor spending decisions based on their effectiveness—not their cost. A quality, evidence-based, effective program that focuses on improving long-term health outcomes can yield greater savings than short-term thinking that simply looks for ways to avoid immediate expenditures.

Examples of the effective use of data to inform budget decisions can be found here.

When policymakers need to make quick and challenging determinations about public spending in a policy environment like that of COVID-19, they should start by assessing the quality of evidence supporting the programs and making data and research an essential tool in the budgeting process. Where available, states can use existing performance data about programs to help inform decisions now and in the future.

Whether legislating through an economic expansion or a recession, policymakers should follow the same practices and principles of evidence-based policymaking. It is critical that states employ data-driven, long-term strategies when assessing programs and creating budgets to make the most of taxpayer-funded programs.

Sara Dube is a director and Carli Dimino is a senior associate with The Pew Charitable Trusts’ Results First initiative.