Roundup: State Budgets Increasingly Strained as House, Senate Republican Plans Would Impose Major Costs

Senate and House Republican leaders are advancing a massive tax and budget package — a process technically known as reconciliation — that features extreme cuts to food assistance and health care for millions of people to help pay for skewed and unnecessary tax cuts for the nation’s wealthiest households and corporations.^[1] If enacted, the reconciliation package would impose alarming harm to parents, children, veterans, seniors, people with disabilities, and others across every community in every state.^[2]

Among the plans’ harms are a series of substantial new costs for state and local governments. These will come both directly through added program costs — in particular for Medicaid and the Supplemental Nutrition Assistance Program (SNAP) — and indirectly through longer-term spillover effects, such as inevitable spikes in uncompensated care costs due to widespread coverage losses stemming from cuts to Medicaid and the Affordable Care Act (ACA) marketplace.^[3] Given the requirement that states and localities balance their budgets, the added costs would be hard to shoulder even when times are good.^[4] But they would be especially challenging to reconcile now, with state finances under growing strain and economic forecasters citing increased risks of recession.^[5]

The following offers a high-level window into how states’ fiscal conditions are faring as of mid-2025. Most show increased pressures due to a range of policy and economic factors — and before accounting for the potential of steep federal spending cuts.

Alabama

Alabama is projecting relatively flat growth moving forward, as revenue collections have recently returned to normal following recent years’ sizable surpluses (which many states enjoyed). The state has also recently been wrestling with the costs of a new exemption for overtime pay — the first state to exclude that income from tax — far exceeding initial projections. While estimates originally projected the tax cut would only cost the state $34 million annually, later reports found it ended up decreasing revenue by $230 million over just the first nine months of 2024. State legislators chose to let the measure sunset this June, citing concerns over cost.

Alaska

Alaska’s distinctive fiscal structure depends on oil prices, whose fluctuations this year are forcing state legislators to wrestle with an emerging shortfall: estimated revenues are coming in around $500 million less than projected expenditures. Alaska has no personal income tax or sales tax. Oil revenue makes up around a third of Alaska’s general-purpose revenue each year, and a large share of the rest comes from investment returns on the state’s unique oil-funded savings account. On one hand that generates enough revenue to cover basic state functions and provide annual rebates to state residents, but at the same time it leaves state finances comparatively volatile.

Arizona

Arizona’s revenue trends have been weakening recently: in April state economists lowered the expected state revenue growth for next year from $612 million to $277 million. That leaves a small surplus — less than 2 percent — in the expected $17.6 billion budget for the coming year. The state entered the year on relatively firm footing after a challenging 2024. In that year, Arizona faced a massive $1.3 billion budget deficit, which legislators filled through a series of difficult cuts to education, infrastructure, and other services — with one example being completely eliminating a $333 million line item dedicated to improving the state’s water infrastructure.

Arkansas

Revenues in Arkansas have been gradually weakening recently, even though they continue to slightly outpace the state’s now-significantly lowered revenue forecasts (in the wake of several income tax cuts adopted over recent years). For example, Arkansas’ fiscal year-to-date tax revenue as of April was $5.91 billion, down 3.1 percent compared with the same period in the previous fiscal year.

California

In May Gov. Newsom announced that the state faces an unexpected $12 billion shortfall, which will require making “difficult but necessary decisions” sometime soon. California has faced periodic shortfalls in recent years, for reasons including the state’s tight linkages to stock market volatility, a deep housing crisis in the state, and the economic supply chain disruptions from COVID-19.

Colorado

In Colorado, recent revenue projections suggest the state’s strained fiscal condition could continue: in June, the state revised its fiscal 2026 general fund revenue forecast downward by $313 million compared to its March forecast. This after lawmakers had to close a $1.2 billion shortfall this year, caused in large part by the state's distinctive Taxpayer’s Bill of Rights (TABOR) system, to balance the budget. Closing this shortfall was equivalent to making a 7 percent cut to the state’s $17 billion general fund for the 2025-2026 fiscal year, which starts July 1. Lawmakers’ broad mix of cuts included ones to transportation projects, local agencies, and some social programs.

Connecticut

Unlike many states, Connecticut continues to enjoy a sizable budget surplus. This is due largely to a combination of strong stock market performance and a set of sweeping state fiscal controls implemented in 2018, which have swelled the state’s finances but also complicated the state’s budget process and led to paltry investment across a range of state and local services. This year, for example, the state’s governor and legislative leaders had to engage in extensive negotiations to slightly exceed the state’s long-standing spending limits to cover rising Medicaid costs.

Delaware

Policymakers in Delaware are exploring a mix of tax reforms and budget choices in response to an emerging shortfall caused by weakening revenue growth and increasing uncertainty due to federal layoffs, tariffs, and other economic headwinds. With expenditures continuing to rise with growing needs, the state's revenue growth is falling; compared to 5 percent revenue growth in fiscal year 2025, growth is expected to drop to 2 percent for 2026 and to 1.6 percent by 2028.

District of Columbia

The District of Columbia is facing a substantial revenue shortfall, which could exceed $1 billion over the next three fiscal years. Recent projections pointed in particular to a sharp decline in commercial real estate values mostly attributed to changes in work patterns due to COVID-19, as well as falling employment levels as the Trump Administration reduces the federal workforce significantly. In a March report, official forecasters noted that “the District's economic outlook has deteriorated significantly from the December forecast,” and that recent and expected drops in wage income and consumer buying power was already leading to lower than expected revenue from D.C.’s individual income and sales taxes. And House Republicans in May adopted a punitive measure that effectively caps D.C.’s local budget at prior-year spending levels, which in practice cuts $1 billion from D.C.’s budget halfway into the fiscal year.

Florida

Florida lawmakers this year are debating how to either slash spending or pursue additional revenues in response to recent budget forecasts, which show the state will face a $2.6 billion deficit next year that could grow to about $7 billion the year after. As one of the handful of states that don’t tax personal income, the state’s revenue options are mostly limited to increasing sales taxes and fees. Even still, some policymakers are also advancing proposals that could further weaken those tax sources. Although the state has approved a mix of spending increases and tax cuts in recent years, the looming prospect of deficits could lead to more austerity-minded policies.

Georgia

In Georgia revenue collections over the past year have slowed significantly from their prior peak, signaling that the state’s revenue boomtime is likely at or near its end. Georgia is among the states with a lingering surplus due to swelling revenues in the wake of the COVID-19 recovery, as well as a generally expanding state economy and population. Net tax collections were up about 1.8 percent for the first half of fiscal year 2025, but that increase was due in part to Gov. Kemp’s having suspended Georgia motor fuel tax collections for two and a half months the prior year. State revenue was down about 1 percent over that same half of fiscal 2025 after accounting for the depressed baseline.

Hawai‘i

A recent alarming forecast in Hawai‘i predicted that the state will collect $550 million less in taxes over the next two years than lawmakers expected when they drafted the new state budget this spring. The Hawaiʻi Council on Revenues said it expects state tax collections to decline by 3.5 percent in the fiscal year that begins July 1, then grow by just 1 percent the following year — well below the rate needed to keep up with standard expenditure growth. In addition to tax cuts Hawai‘i lawmakers approved two years ago, which are having a bigger impact on revenue than expected, state experts have also pointed to Trump Administration tariff policies dragging down Hawaii’s economy, which relies heavily on tourism and trade.

Idaho

Idaho’s revenue collections are slightly outpacing where they were this time last year, although recent indications suggest that upward trends might be weakening. Through April, state revenues were nearly $100 million below the Idaho Legislature’s forecast for the current 2025 fiscal year. Idaho is among the states that enacted large income tax cuts in recent years, and a separate bill approved in 2024 is now diverting some sales tax revenue from the general fund to other needs such as school maintenance and property tax cuts.

Illinois

Illinois recently reduced its revenue forecast for the coming fiscal year by about $500 million due to uncertainty around the economic outlook and potential federal funding cuts. In a May report, state experts said they expect $54.9 billion in revenue in the 2026 fiscal year, a 1 percent drop from the roughly $55.5 billion forecast in February, with officials citing global trade friction and weakening consumer confidence. Meanwhile, Chicago-area transit agencies face a $730 million shortfall for fiscal 2026, while Chicago Public Schools and other districts are asking lawmakers for help closing significant budget gaps caused by the expiration of federal pandemic school aid.

Indiana

Indiana recently projected an expected $2 billion shortfall, which sent lawmakers scrambling with only a couple weeks left in legislative session. In the end, Republican leaders chose to make up the difference by raising the cigarette tax, cutting public health and higher education funding, and spending down budget reserves. As the Senate’s chief budget-writer said, “This one scares me a lot more [than the Great Recession] because the number is a lot higher. And back then, if you remember, we had federal money to backfill. We don’t have any federal money to backfill. This is all on us. So we’re going to have to live within our means.”

Iowa

A recent revenue estimate projected that Iowa’s revenue would drop from $9.76 billion in fiscal year 2024 to $9.13 billion in the current fiscal year, 2025 — a drop of $621 million, or 6.4 percent. State revenues are expected to drop to $8.51 billion in fiscal year 2026, a decline of another $627 million, or 6.9 percent. Lawmakers chose to tap some one-time funds to cover this year’s gap, something generally seen as a bad sign when occurring outside recessions.

Kansas

Kansas is projecting an estimated $731 million shortfall by fiscal year 2029, due to a combination of weak revenue projections, inflation, multiple recent tax cuts, and in some cases using one-time funds to spend more than the state is bringing in. According to the governor’s budget office, a combination of slowing revenues and rising spending means that over the current fiscal year and the next four, Kansas will spend an average of $790 million more per year than it takes in.

Kentucky

Kentucky entered 2025 projecting a revenue decline of $213 million compared to the year prior, marking only the fourth time in the last 50 years that Kentucky revenues have declined year-over-year. The previous three were twice during the Great Recession and once during the dot-com bust of the early 2000s. Weakening revenues in the state are largely attributed to a series of large income tax cuts enacted the past few years, alongside similar economic headwinds that are affecting the majority of states. Weakening revenue collections in the state are also widely expected to worsen, due to additional scheduled income tax cuts that could eventually eliminate the state’s personal income tax entirely.

Louisiana

Louisiana faces significant fiscal challenges due largely to the expiration of temporary taxes, namely a 0.45 percent sales tax and 2 percent business utilities tax, that were approved under the prior administration to close an emerging shortfall and protect key services. With those coming off the books, state economists are projecting a $667 million gap between revenues and expenses by 2028. In June, state senators shelved a sizable income tax cut package that could have nearly doubled that projected shortfall to more than $1.1 billion, citing cost concerns.

Maine

In Maine, officials at the start of the year projected around a $637 million structural deficit in the general fund for the upcoming biennium, two years after forecasts showed a structural surplus. More recently, state experts revised the state's forecast downward by $23.3 million for the fiscal 2026-2027 biennium, compared to those December projections. The forecast emphasized the high degree of uncertainty in the current economic forecast, especially due to rapidly changing tariff policies, a period of significant federal fiscal austerity, and global geopolitical tensions, including between Canada and the U.S. that a could drive a decline in Canadian tourism to Maine.

Maryland

In April the Maryland General Assembly passed the state's budget on the final day of the legislative session to close a $3.3 billion deficit. The plan includes about $1.6 billion in new revenues, through targeted income tax increases on high incomes, a new 2 percent tax on capital gains, and tax increases on recreational cannabis and sports wagering, alongside a collection of budget cuts adding up to more than $2 billion. Meanwhile, a March revenue estimate suggested additional headwinds could be on the horizon: it noted that the state's most probable outlook was a significant reduction in employment and spending that will slow Maryland’s economy, due in large part to widespread federal layoffs.

Massachusetts

Massachusetts’s fiscal position is a somewhat distinctive case, due to voter approval in November 2022 of a new tax surcharge on its high-income residents. Revenues from that new tax — known widely as Fair Share — have continued to outpace initial projections, raising about $2.2 billion during its first year in effect versus early expectations of closer to $1 billion. But in contrast to those rising dollars — which are earmarked specifically for education and transportation needs — revenue sources that support other areas of the state’s budget have been relatively flat. At the state’s annual revenue estimating conference in December, fiscal experts and economists offered cautious outlooks for the economy and state revenues over the second half of fiscal 2025 and for fiscal 2026. They reported that year-to-date collections for the fiscal year up to that point totaled approximately $12.5 billion, which was $129 million below benchmark.

Michigan

In May, the Michigan Senate revised its official revenue estimate downward by close to $1 billion, citing tariffs and economic uncertainty, a sharp contrast to projections as recently as this January which were still projecting surpluses. The estimate noted that revised general revenues for the current fiscal year would increase by only 0.6 percent, compared to a 2.4 percent increase last year. If state budget plans under consideration are not adjusted accordingly, Michigan could face a budget deficit of over $968 million in the upcoming fiscal year, according to the Senate report. A similar analysis recently released by the state House projected a smaller yet still significant downward revision of $418 million.

Minnesota

Minnesota could face a significant budget shortfall of nearly $6 billion in the coming years, state economists project. A March forecast showed a $456 million surplus for the upcoming two-year budget, which covers the 2026-2027 fiscal year — down $160 million from the estimate released in December. If lawmakers spend down that surplus and the state continues on its current trajectory of spending and revenues, a $6 billion deficit could loom over the 2028-2029 budget.

Mississippi

Revenue collections in Mississippi have been trending downward over the second half of the state’s fiscal year, with May being the fourth straight month that revenues came in lower than what was collected last year. Earlier this year, Mississippi lawmakers approved a measure to gradually phase out the state’s income tax, which currently accounts for roughly a third of the state’s annual general budget. Regardless of one’s views on the underlying policy, it is inevitable that such a drastic move will have a significant effect on future revenues.

Missouri

Missouri is facing a fourth year in a row where revenue does not keep up with inflation. Like many states, Missouri enjoyed double-digit revenue growth for the two years during the economic recovery from COVID-19, which allowed the state to accumulate healthy enough budget reserves that lawmakers entered 2025 with a multi-billion-dollar surplus. But those accelerated revenue trends ended in early 2023, and state revenue growth entering the year had dipped into negative territory for the first time in a decade. The state is now also facing the prospect of revenues weakening further due to a major new capital gains tax cut enacted earlier this year.

Montana

Montana policymakers recently adopted a biennial budget with modest spending increases over the prior two-year cycle, after having entered 2025 with state fiscal experts projecting moderately positive — yet likely slowing — revenue growth over coming years. Alongside the budget plan, state lawmakers also approved a major income tax cut that is expected to reduce state revenues by an estimated $267 million a year by 2028, adding to prior revenue losses already baked in from a series of income tax cuts enacted in recent years.

Nebraska

Nebraska policymakers recently wrapped the state’s legislative session, which was defined in large part by a projected two-year shortfall of $432 million, equivalent to about 8 percent of the state’s general fund. Negotiators eventually settled on a broad mix of agency cash transfers, rolling back some tax breaks, tweaks to teachers’ retirement, and cuts to programs such as public health to fill the gap.

Nevada

Nevada forecasters in May said the state could expect approximately $12.2 billion in general fund revenue for the fiscal 2026-2027 biennium, a $191 million decrease, or 1.6 percent, from its December forecast. Meanwhile, a separate analysis of the state’s education budget projected a $160 million decrease from previous estimates — resulting in a total decrease of approximately $350 million. In their May presentation, state economists noted they expect a potentially strained labor force amid reduced immigration, modest gains in unemployment, and decreased tourism — a series of economic headwinds that would in turn depress the state’s future fiscal outlook.

New Hampshire

Granite State lawmakers entered 2025 with a modest budget gap beginning to emerge, as collections continued to fall below expectations due in large part to the recent elimination of the state’s limited income tax (on interest and dividends) and underperformance of the state’s two main business taxes (on which it is disproportionately reliant). As a result, Gov. Ayotte announced a state hiring freeze at the start of the year, and the state House in April approved a budget plan with major spending cuts to a range of services, widespread hiring reductions, and outright elimination of several state agencies. More recently, state senators adopted a plan with more modest cuts, but questions remain as revenues have continued to underperform expectations over the fiscal year’s closing months.

New Jersey

New Jersey’s fiscal situation today includes a mix of good news and cause for concern. On one hand, state tax collections have been outpacing expectations in recent months, due in large part to strong returns from a series of revenue-raising policies enacted over the past few years. State officials projected in May that New Jersey would bring in $57.1 billion in the fiscal year that begins July 1, up from the $56.8 billion forecast in early April. At the same time, that still leaves the state facing a $1.2 billion dollar shortfall for the next fiscal year. The state also faces the potential for longer-term structural deficits, as well; one recent analysis, for instance, found an 85 percent likelihood that state revenues would fall an average of $3.7 billion to $6.7 billion short of the amount needed to maintain state spending at current levels between the 2026 and 2029 fiscal years.

New Mexico

New Mexico continues to be in a stronger fiscal position than many states, in large part due to the state’s ongoing natural resource boom and some policies adopted at the state level to preserve a large share of those funds in rainy day savings. At the same time, revenue collections have moderated recently, and state experts also warn that the state’s relatively slow-growing population and economy could create some headwinds down the road. Currently, a fall forecast projected that New Mexico would generate $19.7 million less than what the state pulled in last fiscal year. It’s the first time since at least 2020 that the state was expected to collect less in revenues over the prior year.

New York

New York is among the states that in recent years has been wrestling with structural budget deficits; specifically $1 billion in fiscal year 2026, $6.2 billion in 2027, and $7.1 billion in 2028, according to estimates released last fall. At the same time, the state’s revenue performance over the past year or two has come in better than expected, which allowed the state to recently approve a budget including moderately higher investment and some targeted tax rebates for low- to middle-income taxpayers. Nevertheless, a forecast this spring projected that New York could face some fiscal and economic headwinds moving forward; it predicted both the economy and revenues to see moderate growth for calendar year 2025, with the economy facing downside risks in the coming year from expected changes to U.S. tax, trade, immigration, and fiscal policies, and worldwide uncertainties.

North Carolina

North Carolina continues to face ongoing revenue challenges. Revenues are projected to remain essentially flat in the upcoming 2026 fiscal year that starts in June, before turning sharply negative the year after, with projected declines of 2.4 percent. Tax cuts approved in recent years are projected to cost at least $8 billion annually by 2031, and potentially more than $13 billion by that time if a series of automatic tax triggers are met. It also faces a daunting $60 billion price tag for recovering from Hurricane Helene, which wiped out roads, bridges, businesses, and homes across much of the state last October. Due to the combination of spending pressures and tax reductions, state experts now expect an estimated budget shortfall of $3.5 billion by 2028, equal to about 10 percent of the state's general budget.

North Dakota

North Dakota entered its 2025 with both a lingering surplus and revenue forecasts beginning to slow from prior levels, due to factors including declining oil tax revenue and economic uncertainty about tariffs. In early May, lawmakers there approved a two-year budget about 3.5 percent above the prior cycle, with new funding additions for property tax offsets, a new state hospital, and funding to address overcrowding at jails and prisons. Looking longer term, North Dakota is among a subset of states that are highly dependent on fossil fuel revenue, which can fluctuate significantly from year to year. And like other states, North Dakota continues to provide the industry with tax exemptions. By one estimate, recently expanded oil tax exemptions in North Dakota could eat into that revenue source by about 20 percent.

Ohio

The budget debate in Ohio is still ongoing, with House members having approved a plan in April consisting of sizable spending cuts, an expanded private school voucher program, and a costly new tax break for the Cleveland Browns. In June, Senate Republicans approved their own plan that features $1.1 billion in income tax cuts, heavily weighted toward the state’s wealthiest households. Broadly, Ohio legislators entered this year’s legislative session amid moderating revenue collections and facing major questions on how the state plans to fund public schools moving into the 2026-2027 fiscal year. According to the 2021 Fair School Funding Plan, Ohio schools need about $666 million annually to be fully funded, and in 2025, that number inflated to nearly $800 million. However, the proposed Ohio House budget only allocates $226 million.

Oklahoma

Oklahoma recently concluded its legislative session, with policymakers enacting a major new round of personal income tax cuts — which could eventually eliminate that state tax altogether if a series of new revenue triggers are met in future years. Earlier in session, Gov. Stitt had laid out a recommendation for significant budget cuts and flat spending moving forward, reflecting both softening revenues as in most states, plus growing pressures caused by multiple tax cuts approved over recent years.

Oregon

A May revenue forecast in Oregon projected an emerging shortfall of about $755 million over the next two years, due to a combination of sluggish income tax collections — which the state disproportionately counts on due to its lack of a state sales tax — and increasing economic headwinds. State experts observed that the state’s economic outlook is highly vulnerable to federal policies related to tariffs, immigration, and potential budget cuts, especially given that exports and manufacturing play an outsized role in the state. Oregon’s state finances are also intrinsically constrained due to the state’s distinctive “kicker” law, which returns excess revenues above a formula-driven threshold to taxpayers: in 2025, that system is slated to refund an estimated $1.64 billion that would otherwise be available to support the state’s public services and future unmet needs.

Pennsylvania

Pennsylvania is facing a significant structural budget deficit that is projected to grow, due to a combination of factors including rising costs from inflation, an aging population, and revenues that have slowed from the post-COVID peak. According to the state’s fiscal office, the gap could expand to an estimated $7.6 billion by the 2027 fiscal year, or roughly 10 percent of the state’s projected annual expenditures by that time. The state’s fiscal office also projects that lawmakers could have to deplete the state’s cash reserves by 2026 year without corrective action, such as budget cuts or raising revenues.

Rhode Island

Rhode Island entered 2025 facing a budget deficit of about $250 million, a noteworthy sum for the small state that has spurred debate over taxes and spending in recent months, including a sustained push to enact a new tax surcharge on high-income households (similar to the “Fair Share” tax in Massachusetts). At the same time, revenue projections in late May delivered some welcome news: revised projections are that the state will collect about an extra $80 million over the remaining of the fiscal year and into next, shaving nearly one-third off the expected deficit and leaving lawmakers with a $170 million spending gap to close as their legislative session continues.

South Carolina

South Carolina is among the roughly dozen states that have recently bucked the national trend, with 2024 fiscal year revenues staying in positive territory and the state also modestly exceeding its 15-year revenue growth trend. In turn the state’s fiscal year 2025-2026 budget projects a surplus, and state forecasters recently confirmed that tax collections continue to modestly outpace earlier projections. Nonetheless some potential challenges loom, including the impact of large income tax cuts enacted in 2022 and economic headwinds from federal tariff policy that could impact the Charleston port.

South Dakota

South Dakota is facing a budget shortfall in the current fiscal year, partly due to a temporary sales tax reduction implemented in 2023. This reduction, which lowers the sales tax rate from 4.5 percent to 4.2 percent, is costing the state an estimated $100 million annually. Additionally, revenue forecasts for the current and next fiscal years are projected to decline. South Dakota’s revised forecast in February projected $2.45 billion in ongoing receipts for fiscal 2026, compared to $2.46 billion in the governor’s recommended budget from December.

Tennessee

Tennessee is among the states still enjoying relatively large lingering surpluses from strong revenue growth and federal aid after COVID-19, yet as with most states, revenues have flattened since the post-pandemic peak. The state closed 2024 with several months of tax collections slightly below expectations, for example, and the budget state legislators approved around this time last year was significantly less than the year before, due to flattening revenues and a large tax rebate for corporations. Due to the state’s lack of a personal income tax, budget writers in Tennessee also rely disproportionately on sales taxes and the state’s various business taxes, the latter of which have a history of volatility.

Texas

As a fast-growing state, Texas’ financial position is relatively strong compared to many states, although — as is true with almost all states recently — revenue trends have leveled out from their post-COVID peak and may continue to moving forward. This year, for example, the state had slightly less revenue available for its biennial budget than it did during the prior round. As the state’s comptroller put it, “Texas’ economy doesn’t forecast a recession. We just don’t think it’ll grow in the next year or two at the same pace.” In May state lawmakers approved a budget that leveraged a $24 billion surplus to make modest new investments in public education and infrastructure, alongside major new expenditures for K-12 private school vouchers and property tax cuts.

Utah

Utah entered 2025 with revenue growth having noticeably moderated over the past two years, as the state’s previously booming economy has leveled off and the early impacts from four straight years of state tax cuts begun to be felt. State legislators were expecting a modest deficit when they began work on the budget earlier this year, and subsequent revenue projections this spring came in slightly lower than expected, by about $112 million. While state budget experts are not projecting a long-term structural deficit, they have recently signaled that state policymakers should expect fairly flat revenues over coming years.

Vermont

The Green Mountain State entered 2025 with revenues running slightly higher than projected, due largely to strong income tax collections stemming from its relatively strong labor market and economy (it boasts one of the lowest unemployment rates in the country). As a result, the state’s Republican governor and Democratic legislature recently agreed on a budget that includes only minor spending reductions to key services, alongside some modest new investments in affordable housing, property tax offsets, and a suite of expanded tax benefits for veterans, families with children, and retirees.

Virginia

As a state with a relatively strong economy, Virginia’s revenue trends have continued to pace fairly well recently; according to a May report, general fund revenues are up 6.3 percent compared to the same ten-month period last fiscal year, which tracks slightly ahead of the state’s official forecast. At the same time, one emerging area of concern is the state’s vulnerability to widespread layoffs in the federal workforce, which disproportionately affect its economy, along with Maryland’s and Washington, D.C.'s. As a recent report from the University of Virginia’s Weldon Cooper Center for Public Service found, Virginia could lose 32,000 jobs this year because of federal government cuts, causing economic output to slow and the unemployment rate to rise to 3.9 percent this year and as high as 4.7 percent in 2026. Virginia’s current unemployment rate is 3.2 percent

Washington

Washington State entered this year projecting a major $16 billion budget deficit over the next four-year cycle, due to a combination of factors including rising costs from landmark spending measures in recent years and weak revenue collections due to stock market volatility. After a contentious legislative session, Gov. Ferguson in May signed a budget package that includes about $4 billion in new taxes over two years, various spending cuts, and cash transfers from other state accounts in order to close the gap. As a result of the deal, the state will end the fiscal cycle with a balanced budget but also fairly thin margins and savings for the long term: only $225 million in cash reserves and $2 billion in its rainy day fund.

West Virginia

West Virginia entered 2025 facing a budget shortfall of $400 million, due to a combination of factors including the state’s stagnant population growth and declining revenues from recent tax cuts. In 2024, the state suffered its largest year-over-year revenue decline in 25 years — outpacing the historic decline in the Great Recession — and losses could accelerate due to tax cut triggers currently on the books. While budget-writers this year were able to balance the budget with a mix of one-time funds, modest budget cuts, and keeping funding largely flat (versus keeping pace with growth), the state is projecting a serious structural deficit: an estimated $397 million gap in fiscal year 2027, rising to $493 million by 2033.

Wisconsin

Wisconsin has enjoyed large surpluses this year and entered this legislative session with one as well — specifically a $4.3 billion projection from the nonpartisan Wisconsin Legislative Fiscal Bureau. However, that is down slightly from prior budget cycles. Two years ago, lawmakers began with a projected $7 billion surplus. And depending on where things land this legislative session, that downward trend could continue — one estimate of Gov. Evers’ initial budget plan, for example, projected that the state’s operating surplus could drop to about $646 million at the end of the 2027 fiscal year and could be short about $1.6 billion by the end of the 2028 fiscal year and nearly $4 billion by the end of the 2029 fiscal year.

Wyoming

With the smallest budget of any state, Wyoming has a history of cyclical shortfalls because its economy is closely tied to the booms and busts of oil, natural gas, and coal — making the state’s revenue flows hard to predict. This year, the state faced a highly contentious — and by some accounts unprecedented — impasse over passing its midyear supplemental budget, with conservative legislative leaders in both chambers disagreeing over measures including deep spending cuts proposed by hardliners, emerging questions over growing impacts from recently enacted “historic” property tax cuts, and soaring costs from widespread wildfires last year.