The fiscal balance indicator reveals whether states have lived within their means over the past 15 years and annually by assessing how closely total revenue and total spending align. States can withstand periodic deficits, but a long-term gap between revenue and expenses pushes some past costs onto future taxpayers and may indicate an unsustainable fiscal trajectory.
Updated: Sept. 3, 2026
State Surpluses Shrank in FY 2024 as Extraordinary Budget Conditions Waned
The lingering effects of the pandemic-era revenue wave, during which states saw record-high tax collections and unprecedented federal funding, helped every state but one achieve an annual surplus in fiscal year 2024. However, the scale of the surpluses shrank in most states as these budget conditions dissipated. The 50-state median annual fiscal balance also declined for the second year in a row but remained above pre-pandemic levels, with revenue at 106.2% of the year’s expenses.
While annual balances offer a snapshot of fiscal conditions in a single year, longer-term trends can help states identify underlying issues. Over the 15 years from fiscal 2010 to fiscal 2024, three states incurred revenue shortfalls relative to expenses. During this period, the number with long-term deficits declined—and the states still in the red narrowed their gaps. Year-over-year improvements can be a positive sign, but it can take multiple years of annual surpluses to reverse a long-term deficit.
Although most states balance their budgets on an annual or biennial basis, budget documents do not offer a complete picture of their fiscal sustainability. States’ annual financial reports, on the other hand, provide a fairly comprehensive view of whether revenue—composed primarily of tax dollars and federal funds—has been sufficient to cover all state spending over the short and long terms.
States’ fiscal situations fluctuated dramatically during and following the COVID-19 pandemic, swinging from 18 states with annual deficits in fiscal 2020 to widespread surpluses in subsequent years, driven in part by historic levels of federal aid.
By fiscal 2024, fiscal conditions had begun to return to pre-pandemic levels as the revenue wave ebbed. Total inflation-adjusted state tax collections fell in most states for the second year in a row in fiscal 2024, with the declines largely attributed to the adoption of widespread tax cuts, in addition to waning pandemic-era factors. Although nearly every state still avoided an annual deficit, declining revenue, combined with increasing expenses, continued to reduce the scale of their surpluses. Of the 49 states with a surplus in fiscal 2024, 41 had smaller surpluses than in fiscal 2023. One state slipped from a surplus into a deficit.
Comparing states’ total revenue with expenses in fiscal 2024 shows that:
- Mississippi was the only state to record an annual deficit in fiscal 2024 at 99.9% of expenses (down from 111.3% in fiscal 2023), linked to a combination of expenditure growth and a decrease in revenue collections. The state enacted significant income tax cuts that eliminated an income tax bracket in calendar year 2023 and phased in rate reductions starting in calendar year 2024, both of which affected fiscal 2024 collections.
- Wyoming recorded the largest surplus for the second year in a row at 155.9%, a dramatic swing from being one of only two states with an annual deficit two years prior in fiscal 2022. The shift resulted primarily from an increase in state revenue, driven largely by greater tax collections and investment income.
- After Wyoming, New Mexico (137.2%), North Dakota (135.9%), Alaska (135.2%), and Texas (118.1%) recorded the largest annual surpluses.
- Like Wyoming, Alaska continued its significant turnaround from a fiscal 2022 deficit. Alaska’s recent year-to-year shifts can be attributed to the state’s permanent fund investment earnings and interest.
- Vermont and Ohio had the lowest annual surpluses at 100.2%, followed by Arizona and New Hampshire (100.4%), and California (101.1%).
- The 50-state median annual revenue was 106.2% of total expenses. Additionally, each U.S. Census Bureau region accumulated an annual surplus, with the median for the West leading at 108.9%, followed by the Midwest and South (both 106.4%), and Northeast (105.2%).
Official accounting reports for fiscal 2025 are still pending for some states, but available data shows that overall tax collections stabilized, albeit at lower levels relative to their long-term trends. Although most states maintained relatively strong fiscal positions in fiscal 2025, states face ongoing uncertainty related to changes in federal policy and mounting budget pressures. These factors, combined with continued expenditure growth, could throw more states’ finances out of balance.
States’ long-term ledgers
This indicator assesses state performance using two analyses: first, by examining states’ year-by-year financial records to identify how often they experienced shortfalls; and second, by comparing their total revenue with expenses over 15 years to uncover whether they finished the study period with a net surplus or deficit.
Over the long term, just three states recorded a 15-year shortfall at the end of fiscal 2024: Illinois, Massachusetts, and New Jersey. Two, Connecticut and Hawaii, reversed their previous long-term deficits. Both were able to maintain annual surpluses between fiscal 2022 and fiscal 2024, which contributed to the shift. However, the change also partly reflects the moving 15-year window. Fiscal 2009, the last year of the 2007-09 Great Recession, dropped out of the long-term calculation. Future years will show whether these new surpluses reflect lasting improvement, rather than a shifting window.
Although states can withstand periodic deficits without endangering their long-term fiscal health, chronic shortfalls are one indication of an entrenched structural deficit in which, without policy action to correct the imbalance, revenue will continue to fall short of spending.
Comparing states’ total revenue with expenses, in aggregate from fiscal 2010 to 2024, shows that:
- The three states with long-term deficits were New Jersey (97.3%), Massachusetts (97.9%), and Illinois (98.3%). Each state experienced a deficit in at least 10 of the 15 years studied.
- While Illinois, Massachusetts, and New Jersey still carry long-term deficits, the scale of those deficits has decreased over the last three 15-year periods examined, suggesting their structural gaps may be narrowing.
- Alaska accumulated the largest long-term surplus (133.6%), followed by North Dakota (126.2%), Wyoming (125%), Utah (114.1%), and New Mexico (114%).
- A total of 12 states recorded a surplus in each of the 15 years between fiscal 2010 and 2024: Alabama, Florida, Idaho, Iowa, Montana, North Carolina, South Carolina, South Dakota, Tennessee, Texas, Utah, and Virginia.
- The 50-state median revenue was 104.6% of expenses over the 15 years. Additionally, each census region accumulated a long-term surplus, with the median for the West leading at 106.5%, followed by the South (105.2%), Midwest (104.9%), and Northeast (102.6%).
Annual or biennial budget cycles can mask deficits because they allow states to adjust the timing of key financial events—such as when they receive cash or pay bills—to reach fiscal balance. For example, states can accelerate certain tax collections or postpone making some payments to balance the books. Zooming out from this narrow focus offers a longer-term lens that can clarify the full picture to help policymakers better align spending and revenue to address gaps between needs and available resources.
Multiple factors can move a state’s annual revenue and expenses out of balance, including changes in the economy, policy, and demographics.
Looking at states’ balances year by year, shortfalls were most widespread during and immediately after the Great Recession. In fiscal 2010, states were still navigating the aftereffects and more than half of states recorded annual deficits. Another wave of annual deficits occurred in fiscal 2016 and 2017, as many states slogged through the weakest two years of tax revenue growth outside of a recession in at least 30 years. Since then, widespread tax revenue gains and historic federal pandemic aid have contributed to fewer than a fifth of states recording annual deficits each year, outside of the pandemic year of fiscal 2020. New accounting rules that became effective in fiscal 2018 may have also played a role. These rules changed how states estimate unfunded retiree health care costs, lowering expenses in some states, at least on paper. As a result, fiscal conditions pre- and post-2018 are not directly comparable.
Delays in state reporting
The Government Finance Officers Association recommends that states publish their annual comprehensive financial reports (ACFRs) within six months of the close of the fiscal year, which means that, for most states, an ACFR for fiscal 2024 should have been published by Dec. 31, 2024. However, many states are running behind these publishing standards because of widespread workforce shortages in accounting and auditing offices, new accounting requirements, increased financial reporting demands associated with federal pandemic funding, and other factors. For the fiscal 2024 publication cycle, four states did not release their ACFRs until 2026, over a year past the recommended deadline: Arizona, Illinois, Mississippi, and Nevada. These delays can present serious challenges, such as hindering states’ ability to identify gaps between long-term spending and revenue, and may prompt credit rating agencies to downgrade or withhold states’ ratings.
Why Pew assesses fiscal balance
By taking a step back and considering how 15-year total revenue aligns with expenses, The Pew Charitable Trusts aims to help states evaluate whether they take in enough money to cover their expenses or need to change course to bring their finances onto a sustainable path. Rather than track cash as it is received and paid out, as budgets generally do, annual comprehensive financial reports attribute revenue to the year it is earned, regardless of when it is received, and assign expenses to the year they are incurred, no matter when the bills are actually paid. This approach captures deficits that can be papered over in the state budget process.
Accounting for funds in this way is like a family reconciling whether it earned enough income over 12 months not just to cover costs paid with cash but also to pay off credit card bills and stay current on car or home loan payments, rather than pushing some charges off to the future.
Importantly, however, just because a state raised enough revenue over time to cover total expenses does not necessarily mean that it paid every bill. When a state’s annual income surpasses expenses, the surplus is sometimes directed toward nonrecurring purposes, such as paying down long-term obligations—including unfunded pension or retiree health benefits—or bolstering reserves. But in other cases, a state might use regular surpluses to create or expand services and to pay the associated recurring bills, while falling behind on annual contributions to its pension system or other existing bills.
So, although reviewing financial reports, rather than simply looking at annual or biennial budgets, captures states’ capacity to pay their bills, it does not reconcile whether revenue was used to cover specific expenses. Further insights can be gleaned from examining states’ debt and long-term obligations.
For instance, a state whose annual revenue falls short of expenses generally still balances its annual budget, turning to a mix of reserves, debt, and deferred payments on its obligations to get by. But states that are forced to rely on these strategies regularly risk a vicious cycle in which deficits lead to short-term fixes that exacerbate the deficits and harm residents and businesses. For example, because of chronic deficits, Illinois lawmakers regularly delayed payment to hundreds of vendors, including scores of small businesses and nonprofit organizations, for more than a decade. But this just made the problem bigger—the backlog peaked at nearly $17 billion in 2017—because Illinois pays up to 12% annual interest on unpaid bills. (Despite recording surpluses from fiscal 2022 through 2024, Illinois still had a long-term deficit as of fiscal 2024.)
To avoid long-term outcomes such as Illinois’, states should seek to prevent structural deficits before they start. Pew recommends that states do this by using an analytical tool called a “long-term budget assessment”—which uses projections of revenue and spending at least three years into the future to evaluate whether the state is likely to experience deficits and, if so, why. For example, after conducting a long-term budget assessment in 2022, New Mexico discovered that within about 15 years of the assessment it would face regular and growing deficits, driven mainly by expected declines in oil and gas production. In response, lawmakers started identifying temporary surplus dollars and used them to support various endowments and trust funds, which it anticipates will generate sufficient investment earnings to increase revenue in perpetuity and reduce the deficits. Because they take a forward-looking approach to structural balance, long-term budget assessments serve as a complementary resource to the retrospective of Pew’s state fiscal balance indicator.
Page Forrest is an associate manager and Kellen Silver is a senior associate with The Pew Charitable Trusts’ Fiscal 50 project.
Notes, Sources & Methodology
Notes
Per a recommendation by Connecticut’s Office of the State Comptroller (OSC), Pew used data provided directly by the state for fiscal 2017 and 2018 expenses, rather than pulling from the annual comprehensive financial report (ACFR). These values are consistent with those reported annually since the state’s fiscal 2022 ACFR. Program revenue values from fiscal 2015 to fiscal 2023 were reported incorrectly in Connecticut’s fiscal 2024 ACFR due to a technical error, so Pew used data provided directly by the OSC or from previous years’ reports confirmed by the OSC.
Florida reported revenue and expenses in its fiscal 2024 ACFR for fiscal 2022 and 2023 that were rounded to the incorrect level. Pew used data from previous years’ reports confirmed by the state’s Office of the Chief Financial Officer.
Oregon changed the method for accounting for its tax surplus credit—commonly known as the “kicker”—in fiscal 2024, resulting in significant corrections to general revenue values reported for fiscal years 2015 through 2023. The state previously recorded deficits in fiscal 2016 and 2020, but the change to the reported values has resulted in those years now registering as surpluses.
South Carolina reported in its fiscal 2022 ACFR that previously published data for fiscal 2012 through fiscal 2021 was incorrect due to a technical accounting error. Pew has used the corrected data from the state’s 2022 ACFR. But because the updated report covers only the 10 years from fiscal 2013 to fiscal 2022, Pew sought and received updated fiscal 2012 data directly from the Office of the Comptroller General.
Sources & Methodology
Sources
Pew collected revenue and expenses from each state’s annual comprehensive financial reports using total “primary government” data from the Changes in Net Position table in the report’s statistical section. States report this data for a 10-year period. Pew collected data for fiscal 2015-24 from fiscal 2024 annual reports and for fiscal years 2014 and earlier from the annual reports in which each year’s results were reported for the final time. Pew first collected this data for fiscal 2002.
Pew converted revenue and expenses for fiscal 2010-23 to fiscal 2024 dollars using the U.S. Bureau of Economic Analysis’ implicit price deflator for gross domestic product, accessed in January 2026.
Methodology
This analysis examined states’ annual comprehensive financial reports in two ways: First, Pew compared each state’s aggregate total revenue with its aggregate total expenses for all years since fiscal 2010 to determine whether the state had collected enough funds to cover all costs. This calculation allowed Pew’s analysts to determine whether states had a positive or negative balance between revenue and expenses. Second, Pew compared revenue and expenses for each year to determine how often each state’s revenue fell short of expenses.
To determine whether states had a negative fiscal balance, Pew aggregated revenue and expenses across all years and then calculated the percentage of the expenses covered by the revenue between fiscal 2010 and 2024. Based on that calculation, Pew identified states that brought in less than 100% of the revenue needed to cover expenses over the 15-year period as possibly having structural deficits.
In addition, Pew converted each state’s revenue and expenses for fiscal 2010-23 to fiscal 2024 dollars using the U.S. Bureau of Economic Analysis’ quarterly implicit price deflator, adjusted from calendar year to match the typical state fiscal year (July 1 to June 30), and divided revenue by expenses to determine how frequently each state brought in enough revenue to meet its expenses over the time span.
Pew based its calculations on total primary government revenue and expense data from the governmentwide, full accrual section of the annual report. Full accrual accounting reports all revenue and all expenses for each year, regardless of when cash is received or paid. In contrast, state budgets typically use a cash basis of accounting, which records income when it is received and expenses when they are paid.
The data includes governmental activities (e.g., K-12 education, human services, public safety) and business-type activities (e.g., unemployment compensation funds, lottery sales, liquor sales). Pew excluded discrete component units, also called “auxiliary organizations,” such as economic development authorities and some public universities, which states report separately from primary government activities. States vary somewhat in how they classify entities. For example, New York classifies its state university system as a business-type activity and so the system is captured in Pew’s data, but Hawaii considers the University of Hawaii a component unit, so UH is not captured in Pew’s data. If a state switched the classification of an agency between fiscal 2010 and 2024, Pew used the figures from the most recent annual report.
Revenue is made up of general revenue (such as taxes and investment earnings) and program revenue (charges for services, operating grants and contributions, and capital grants and contributions), which both include federal dollars.
Expense data in the full accrual section of the annual reports includes depreciation of capital assets and the incurred costs of maintenance. Pew used the depreciation cost figures from the most recent annual reports.
The Governmental Accounting Standards Board establishes and periodically revises standards for states’ calculations of accrued revenue and expenses. Several revisions went into effect between fiscal 2010 and 2024, meaning a state’s results might not always be comparable across years even though state-to-state comparisons remain valid. Pew used figures from the most recent annual reports.
Beginning in fiscal 2007, most states began using an accrual-basis annual cost for their retiree health care and other nonpension retirement expenses for public employees. As a result, these expenses increased. States also adjusted the way they calculate pension costs in fiscal 2015 and retiree health care and other post-employment benefits in fiscal 2018 to improve the accuracy and transparency of those costs.
Restatements, prior period adjustments, special items, and changes in accounting principles or estimates were captured only if a state reported them in the revenue or expense section of the Changes in Net Position table. Pew researchers contacted officials in each state’s comptroller office in 2016 to verify that Pew was correctly collecting data for aggregate revenue and expenses from the state’s annual reports.
