Managing a state’s finances—whether working to erase a budget deficit or reaching consensus on what to do with a surplus—is challenging. But planning for fiscal threats beyond the immediate budget cycle is not only far more complex, it’s often overlooked altogether.

The Pew Charitable Trusts is working with policymakers to reimagine their approach to fiscal management, reaching beyond the budget conditions of today to plan for the risks and investment needs of tomorrow. Although many budget challenges are shared, specific needs and priorities vary from state to state. There is no single path to strengthening state fiscal management practices.

Sudden shocks such as recessions and natural disasters can severely strain state finances in the short term, especially for states dealing with chronic deficits from costs outpacing revenue. Compounding these immediate and ongoing threats are emerging trends—population shifts, technological advancements, aging infrastructure, a changing climate—that can lead to future fiscal crises. The absence of critical, long-term preparation could mean the difference between a resilient state budget and an upended one.

Although these risks loom over every state, their true cost can be obscured by one-time infusions to the budget or a lack of information about long-term liabilities, or superseded by more pressing needs. Accounting for and acknowledging these budget stressors can, however, help states avoid painful measures during tough economic times, such as raising taxes when constituents are cash-strapped, cutting key programs people rely on in a downturn, and compromising long-term obligations.

Over the past decade, states have made important progress in strengthening their long-term fiscal health. Some have embraced risk-management tactics, like regularly studying revenue volatility, stress-testing their budgets against future scenarios, and evaluating the risks and rewards of tax incentives. Meanwhile, other states have collectively amassed their largest fiscal reserves on record and have improved their retirement systems to their best condition in more than a decade, according to Pew estimates.

These improvements have established a clear picture of what is possible as states consider the health of their finances over the next decade. Pew can help states build on that success, which is supported by Pew’s track record of providing policymakers across the political spectrum with a rigorous understanding of states’ fiscal health, elevating research-driven best practices, and partnering with state officials to help fortify their state’s future. Pew aims to enable a new approach to state fiscal management, delivering to decision-makers the data, analysis, and guidance they need to face these long-term risks head-on and identify opportunities for growth.

Wollongong, New South Wales
Wollongong, New South Wales
Issue Brief

Stable Public Pension Funding Within Reach

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Issue Brief

Since The Pew Charitable Trusts first evaluated the fiscal health of states’ public sector pension systems in 2007, these retirement plans have varied widely, both across states and year over year, in their ability to cover the costs of promised benefits with the assets they had on hand. But in 2020, pension systems, collectively, met a crucial benchmark for minimum plan funding for the first time since 2001. As a result, states are now positioned to sustainably fund their pension promises for the long run—if they make smart policy choices to seize this opportunity.

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Silhouette of construction worker walking on an I-beam with beautiful sunset sky behind him.
Article

Elevated Inflation Raises Risk of Fiscal Stress for States

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Article

Elevated Inflation Raises Risk of Fiscal Stress for States

State governments face increased costs and potential budget challenges linked to historically high inflation rates. From price spikes for construction materials to labor, the rising costs of goods and services are disrupting state finances on both sides of the ledger.

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Plan signs
Issue Brief

How States Can Manage Midyear Budget Gaps

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Issue Brief

State governments generally adopt budgets that lawmakers believe are balanced, with sufficient revenue to pay for expenses. But because states typically enact their budgets before the start of a fiscal year, policymakers must rely on forecasts of how much revenue the state will collect and how much it will spend.

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Little baby crawling on the pink carpet. Home visiting visit parent mother
Issue Brief

How Low Fertility Affects State Budgets

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Issue Brief

When the economy takes a downward turn, couples often temporarily put off having children.1 But in the years following the Great Recession, births never rebounded. Instead, fertility has largely continued to follow a downward trajectory across the country, falling to a record low in 2020.2 State budgets have started to feel the effects of this long-term decline. The future course of fertility represents a key source of fiscal uncertainty for states as smaller working-age populations may eventually threaten tax bases.

OUR WORK

fiscal 50
Data Visualization

Fiscal 50: State Trends and Analysis

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Data Visualization

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.