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true cost can be obscured by one-time infusions to the budget or a lack of information about long-term liabilities, or superseded by more pressing needs.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.

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Getty Images
Report

Tools for Sustainable State Budgeting

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Report

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.

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A close-up of four microphones, two each being held by two hands. The mics are directed toward a person, visible only from the chest down to the thighs, standing near a podium, wearing a blue shirt, grey slacks, and a burgundy tie. Two other microphones are also visible at the left of the image.

Five State Fiscal Debates to Watch in 2024

Key issues that are likely to capture policymakers’ attention

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As legislative sessions begin in statehouses throughout the country, lawmakers face a host of issues that will affect state budgets. This five-part series previews some of the most pressing fiscal questions state leaders are likely to debate in 2024.

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A student sitting at a table at the end of a library stack.
Article

Restart of Student Loan Payments Could Hurt State Economies

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Article

With the federal government lifting in October its over three-year pause on requiring student loan payments, state economies could take a hit. The approximately 43 million Americans with student loans will have less money to spend. Prior to the pandemic, monthly student loan payments averaged $236 a month.

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Cavan Images RF Getty Images
Issue Brief

Retirement Plans Need to Navigate Volatile Markets

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Issue Brief

Over the past decade, policy reforms and increased financial contributions have dramatically improved the cash flow situation of some of the nation’s most troubled state pension plans. Thanks to these changes, which include reforms to benefit designs, a commitment to fiscal discipline, and greater monitoring of the financial health of public retirement systems, no state is at risk of pension plan insolvency. Nevertheless, many states still have more to do to ensure the long-term sustainability of pension promises.

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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.