Budget Blog

With tighter state budget conditions, heightened economic uncertainty, and declining federal funding, one topic getting increased attention lately is rainy day funds. After experiencing significant growth earlier this decade, rainy day funds stand at near all-time highs. Given states are expecting more limited resources and facing budget pressures, what is the outlook for rainy day funds? What factors might states consider when deciding whether to use these funds? Do all states have a rainy day fund and how do fund sizes vary by state? And how do rainy day funds differ from general fund ending balances? Read on to ... More

Overview Through February 25th, governors from 43 states and territories have delivered a State of the State address. In their speeches, governors described the state of their state as strong, resilient, and well positioned for the future. Many highlighted economic growth, job creation, fiscal discipline, record reserves, sustained investment in core priorities, and efforts to increase opportunities and build a brighter future. At the same time, challenges with affordability and the cost of living emerged as a central focus across many governors’ addresses. Governors repeatedly cited rising housing, childcare, ... More

What does it mean when a state has a budget gap? With state and territory fiscal conditions tightening, it is important to remember the various ways the term may be used and what it does and doesn’t mean. This explainer addresses several common questions including: What is the difference between a budget gap, a budget deficit, a revenue shortfall, and a structural deficit? When a state budget gap is identified, how can a state respond and how does this vary based on timing? Why is it so hard to find standardized data on state budget gaps? Defining Budget Gaps & Other Key Terms ... More

Disasters pose many challenges for states including the immediate response and long-term recovery. Disaster-related tax extensions provide relief for impacted taxpayers, but may present additional hurdles for revenue forecasters and cash-strapped states. To be resilient in the face of increasing disasters, policymakers need to be aware of, and prepared for, potential disruptions to revenue collections, including an expansion of disasters qualifying for extensions. When does the IRS issue disaster-related federal tax extensions? Following certain disasters, the Internal Revenue Service (IRS) will issue ... More

Newly released end-of-year revenue totals indicate states largely saw a third consecutive year of slow growth in tax collections in fiscal 2025. Despite modest gains in revenue collections, most states ended the year above both their original and revised revenue forecasts. Comparing actual collections to forecasts is a better indicator of state revenue performance than year-over-year growth figures which, in many states, have been considerably impacted by recently enacted tax cuts. While most states are reporting revenue surpluses, the surplus amounts are relatively small, especially when compared to the substantial ... More