On March 30, the Center on Budget and Policy Priorities (CBPP) published a report titled, "Many States Face Revenue Shortfalls". The report makes recommendations on steps states can take to strengthen their tax systems and reserves. The report notes that in 2017, half of states are facing or have addressed revenue shortfalls. According to the National Association of State Budget Officers, more states are expecting mid-year revenue shortfalls than in any year since 2010. Unlike the federal government, states have to maintain a balanced budget each year, requiring spending cuts, increased revenues, or tapping "rainy day" funds to make up the difference if a shortfall is expected.
On average, according to the report, nearly a third of state budgets are comprised of federal grants. The Administration's budget proposal, coupled with falling energy prices, state-level tax cuts, sluggish stock market growth, and dropping sales tax collections are adding to state budget uncertainty.
The report recommends that states avoid further tax cuts, avoid depleting budget reserves, start planning now for revenue to offset the potential future loss of federal support, reject artificial spending limits, and address structural problems in state revenue systems.
More information on the report as well as a state by state table projecting revenue shortfalls in 2017 and 2018 is available here.