SUBCOMMITTEE Fiscal Health

Since the start of the COVID-19 pandemic, state budgets and fiscal forecasts have weathered a myriad of changing conditions, from a “V” shaped economic recovery, the injection of historic federal funding through the CARES Act, the American Rescue Plan Act, the Infrastructure Investment and Jobs Act, and the rapid growth of inflation.

The Fiscal Health Subcommittee explored ways that states may improve the resilience of state budgets, navigate new opportunities and challenges for state revenues in the face of shifting economic conditions. Among its policy focus areas included the impact of COVID-19 on state budgets, innovative revenue models, cryptocurrency and blockchain, and the best management of federal funding.

In total, the Fiscal Health Subcommittee released nine policy recommendations across three main focuses — federal funding, innovative revenue models and public-private partnerships, and cryptocurrency and blockchain.

Federal Funding

The historic federal funding allocated to states through the CARES Act, the American Rescue Plan Act, and the Infrastructure Investment and Jobs Act instilled significant opportunity for states to make one-time investments in the health and economic well-being of their residents. This opportunity also brought challenges for states, including the

Innovative Revenue Models and Public-Private Partnerships

The COVID-19 pandemic’s negative effect on state budgets, while significant, was less than feared. Key factors helped soften the fiscal impact on state budgets, including the use of rainy day funds, aggressive and continuing federal support, state tax structures, and the diversification of state economies. As states progress through new fiscal years, new and innovative revenue models will more commonly represent incremental, rather than large scale, efforts to boost state budgets and cannot be relied upon alone to address structural deficits, long-term debt obligations and risks to fiscal resiliency. However, they can be a part of a larger, comprehensive policy conversation and strategy by states to ensure their tax codes reflect current state trends, capture currently unrealized tax revenue and provide another avenue to broaden tax bases.

3. States that have legalized recreational cannabis can consider the effectiveness of implementation, the social impact, the effect on the illegal market, and equity considerations for new industries.

4. States can assess existing statutes enabling public-private partnerships (P3) to ensure maximum flexibility to pursue this approach to achieving capital projects efficiently and effectively.