Long-Term Fiscal Management Tools

Responsible state fiscal policy requires more than just balancing the current year’s budget. It must also include ensuring that the budget is on a sustainable path. Otherwise, policymakers cannot have the lasting impact they hope for: They may act to improve state services or cut taxes only to have to scale those efforts back later. This risk is especially high in the aftermath of the COVID-19 pandemic. Record budget surpluses, driven largely by federal pandemic aid, empowered states to adopt historically large tax cuts and spending increases from 2021 to 2023, investments that many state leaders hope to build on in coming years.

When state leaders have data and analysis that illuminate their states’ long-term risks and outlooks, they are better able to ensure that their budgets stay on a sustainable path. As part of its 2023 report “Tools for Sustainable State Budgeting,” The Pew Charitable Trusts produced fact sheets on each state that, since the start of 2018, has published one or both of two tools that provide the information policymakers need.

How can lawmakers manage budget uncertainty while still meeting residents' needs? Our Kil Huh explains what budget stress testing is and how it works—and how states can use it in the months ahead.

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.