Long-Term Fiscal Management Tools

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One essential question in state budgeting is, “Will the decisions elected leaders make today prove affordable tomorrow?” Although residents will always need government programs and services, such as schools, roads, prisons, and health insurance, budget imbalances can jeopardize governments’ ability to afford these programs and services.

States can use two analytical tools to gauge their risk of imbalances and promote greater budget sustainability: long-term budget assessments and budget stress tests. Long-term budget assessments project revenue and spending several years into the future to show whether states face structural budget deficits and, if so, why. Stress tests estimate the size of budget shortfalls that would result from recessions or other potential economic events and evaluate whether the state is prepared for these events.

The findings of these analyses can inform some of states’ most consequential budget decisions. For instance, if a state cuts taxes this year, will it still be able to afford its spending commitments in five or 10 years—or the next time a recession hits? If a state increases teacher pay, will it face budget shortfalls later? Together, stress tests and long-term budget assessments can help provide the answers.

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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.

Fact Sheet

States' Use of Sustainable Budgeting Tools

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Fact Sheet

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.

What is Budget Stress Testing?
What is Budget Stress Testing?
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What is Budget Stress Testing?

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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.

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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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