Long-Term Fiscal Management Tools

For state government budgets to stay on a sustainable path, policymakers must maintain a long-term perspective, informed by high-quality data and analysis. In a 2023 report, “Tools for Sustainable State Budgeting,” The Pew Charitable Trusts identified and defined two analytical tools—long-term budget assessments and budget stress tests—that can help policymakers ensure that today’s revenue and spending decisions do not cause budget problems in the future.

A December 2023 report from California’s Legislative Analyst’s Office found that the state’s projected deficits had increased to $155 billion through fiscal year 2028, exponentially more than officials had forecasted just months earlier.

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.