Update: State Budgets in Recession and Recovery

State revenues have been rebounding after experiencing a severe decline caused by the Great Recession that ran from December 2007 through June 2009. Nevertheless, tax collections remain below their 2008 peak level and state and local governments continue to shed jobs. As states prepare their fiscal year 2013 budgets, some are projecting a fifth consecutive year of gaps between expected revenues and spending.

This policy brief analyzes recent developments in state government finances and prospects for the future. After an overview of state revenue sources and spending priorities, it discusses what happened in the Great Recession and how states and the federal government responded. The brief then considers challenges to states’ long term fiscal sustainability.

Issue Brief (.pdf)