BEYOND THE NUMBERS
State policymakers need accurate information about the cost of spending- and tax-related proposals to make good decisions about them. Nearly all states produce a cost estimate of bills, typically called a “fiscal note,” but in many states these estimates aren’t very useful, as we explain in a new paper.
Lacking useful information, legislators can enact proposals that cause serious fiscal problems, harming states’ ability to provide for the high-quality education systems, roads and bridges, and other public investments that provide a foundation for strong economic growth. For example, the cost of new programs or tax changes may turn out to exceed the state’s ability to pay, causing unnecessary fiscal stress. Or a new program or tax change may be affordable for a year or two, and then balloon in cost later, causing a crisis that could have been avoided.
States could improve their fiscal notes by adopting the following practices:
- Prepare fiscal notes for all proposals. Legislators need to know a bill’s costs to decide on its merits, to assess its affordability, and to plan for the future. In 38 states and the District of Columbia, fiscal notes are routinely prepared for all or substantially all bills that would have a significant fiscal impact.
- Free estimates from partisan pressure. Having a non-partisan entity prepare the fiscal notes is an important underpinning of having fiscal notes that all interested parties can rely upon. Most states (33 and the District of Columbia) assign the task of preparing fiscal notes to a nonpartisan legislative fiscal office or other nonpartisan entity.
- Project long-term impact. Fiscal notes should reflect the cost of the proposed legislation when fully in effect. Twelve states and the District of Columbia routinely include four or more years in their fiscal notes.
- Revise estimates as needed. Legislation is often modified or amended as it moves through the legislative process, and fiscal notes should reflect these changes. Only slightly more than half the states (26 states and the District of Columbia) regularly revise fiscal notes for changes in proposed legislation.
- Post fiscal notes online. Most states post their fiscal notes on the Internet. Only four of the states that prepare fiscal notes — Georgia, Massachusetts, Mississippi, and New York — don’t do so.
Five states ― Iowa, Louisiana, Maryland, Oregon, and Texas ― and the District of Columbia meet all of these best practices. Seventeen others meet four of the criteria and could upgrade their practices with a modicum of effort. At the other end of the spectrum, seven states meet just one or none of these practices.
Click through the map below to learn more about how each state performs.