CORRECTION: An earlier version of the report included a different version of the map above, which included a broader count of high-scoring states. CBPP considers just 11 to be high-scoring.
Virtually every state could do a better job at long-term fiscal planning, according to a new report from the Center on Budget and Policy Priorities. Just 11 states earned high marks on a 10-point test of their ability to budget in the long-term, according to the fiscal policy group. And now is the time for states to make sure they’re prepared to weather the next storm, the report’s trio of authors argue.
“The Great Recession — the most severe recession in seven decades — blasted holes in state budgets from which they have yet to fully recover,” they write. “… State policymakers should be thinking hard about the future whenever they write a budget, because their decisions will have very big implications many years down the road.”
The group ranked states on 10 measures related to long-term budget planning. Connecticut earned the highest score of 8.5 out of 10. Maryland and Tennessee earned 8 points and Louisiana and Washington each got 7.5. At the other end of the spectrum, Illinois and Montana each scored 4 points. New Jersey scored 3.5 and Oklahoma and South Dakota each earned 3 points.
The 10 measures were broken into three buckets.
- First, states should employ policies that chart a fiscal course.
- They can do so by implementing three kinds of projections:
- A regular multi-year revenue and spending estimate
- Fiscal notes that show the impact of proposed tax and spending bills
- A baseline that shows the cost to continue providing existing services in the medium term
- Second, those projections have to be of high-quality.
- States can ensure that by:
- Reaching an independent consensus among the executive and legislative branches on how the forecast should be made
- Creating a non-partisan legislative fiscal office
- Conducting regular independent reviews of the state’s pensions.
- Third, states have to enact policies that allow them to stay the fiscal course. Four tools would enable that:
- Rainy-day funds that can cover at least 15 percent of a state budget
- Limited terms on tax breaks and credits that allow for regular review
- Standards for pension funding levels and state debt
- Budget status updates
States fared best on the rainy-day fund measure, with 38 earning a full point for having one and nine earning half a point. States also scored highly on the fiscal office measure, with 36 earning a full point and eight earning half a point.
Oversight of tax breaks and credits could use the most improvement among states, with only one earning a full point. Six states — Illinois, Missouri, Nevada, Oregon, Virginia, and Washington — regularly require reauthorization of tax expenditures, but only Oregon’s reviews were comprehensive enough to earn the full point.