‘For Whom the Bell tolls…..’
It’s coming to an end….
The pandemic boom times are over for state lawmakers — and so is their ability to shower big buckets of cash on top priorities like K-12 education while also slashing taxes and socking away reserves.
State budgets swelled by roughly 30 percent over a three-year span as the country grappled with fallout from the public health crisis and Congress handed out federal funds to governments across the country.
Now, states from Massachusetts to Indiana to California are facing falling revenues or lower-than-projected tax receipts for the first time since the economy screeched to a halt in 2020. In some cases, they’re also seeing record surpluses vanish — and transform into looming deficits. It means state lawmakers and governors of both parties will face increasing political peril as they navigate rougher financial conditions….
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The near-term financial picture for states remains remarkably positive. That’s in large part because they stockpiled massive amounts of cash in recent years. States were sitting on fund balances of more than $400 billion at the end of fiscal 2023 — or nearly four times the amount they held in reserve just three years earlier, according to the National Association of State Budget Officers.
“We’re starting to see a decline in that, but rainy day funds remain at or near all-time highs,” said Brian Sigritz, director of state fiscal studies at NASBO. “States still have high rainy day funds that they will be able to tap when [revenues] slow down.”
Still, the increasingly grim economic news for state policymakers has continued to emerge in recent days….