Long-Term Budget Forecasts and Contingency Plans Help States Prepare for Fiscal Challenges (PDF)
Budget Forecasts and Contingency Plans Help States Prepare
In a memo sent Aug. 20, 2021, to Colorado’s Office of State Planning and Budgeting, experts from The Pew Charitable Trusts discuss how two fiscal management tools—long-term budget projections and contingency plans—help states prepare for fiscal challenges. Specifically, long-term (or multiyear) budget projections help leaders identify problems that can build over time, while contingency plans help officials prepare for acute, short-term crises.
In particularly challenging times, when revenue is volatile and priorities may need to be reassessed, it is important that lawmakers manage budgets effectively to mitigate fiscal stress.
A multi-year perspective on revenue and expenditures can help policymakers avoid crisis-driven decisions and unsustainable budget practices. States can use a variety of fiscal management tools to attain this longer-term view of their budgets and to manage uncertainty, including multiyear revenue and expenditure projections, budget stress tests, and contingency plans.
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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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