Caution and Constraint Characterize 2026 State of the State Addresses

Governors’ 2026 State of the State addresses point to a fiscal landscape in transition. Although many states remain in relatively strong positions—with healthy reserves and balanced budgets—the tone of this year’s speeches reflects concerns about fiscal sustainability, mounting costs, and federal policy uncertainty.

As states grapple with fiscal challenges, lawmakers are facing pressure to cut taxes from constituents worried about their household budgets. And although governors from both parties proposed tax reductions tied to improving affordability, many also emphasized fiscal responsibility and spending discipline.

Idaho Governor Brad Little (R) described budget conditions that many states are confronting: “A combination of factors has shifted us from years of record budget surpluses—driven by rapid population growth, business expansion, and one-time federal funds—to a period ahead that demands restraint.”

Although states share fiscal challenges—and even many of the proposed strategies to manage them—sharp partisan differences emerged in how leaders framed federal policy changes and their implications for state finances, highlighting the diverging paths states may take as they navigate the next phase of the fiscal cycle.

Tightening budgets

Faced with sluggish revenue and rising spending demands, governors used their State of the State addresses to advocate for fiscal restraint, though they did so in different ways.

Some governors acknowledged that the COVID-19 pandemic-era conditions that fueled years of tax cuts and spending increases—large federal aid payments, budget surpluses, and record-high revenue—have subsided. “State government has to return to how budgets looked before COVID-19,” said Missouri Governor Mike Kehoe (R), who has proposed more than $600 million in budget cuts “to identify programs that no longer best serve our state or that we cannot afford in today’s budget climate.”

These shifting conditions are also prompting caution on tax policy from some governors. Governor Ned Lamont (D) of Connecticut advised against large, unfunded tax changes, warning that proposals to add “$500 million in tax cuts” and “$500 million in tax credits” risk creating future deficits. Rejecting the idea of deferring costs, he added: “‘We’ll figure out how to pay for it later.’ Oh no, not again.”

Instead of sweeping tax policy changes, many states are pursuing more targeted relief, such as a child tax credit in Rhode Island, an affordable housing credit in Michigan, and energy rebates in Connecticut and Maryland. Several governors focused on efforts to address high utility costs through rate freezes, bill credits, and assistance funds for low- and middle-income families. In nearly every state, affordability was a central theme, and several governors framed tax relief efforts as a way to alleviate financial burdens for residents.

However, a handful of states are still pursuing larger tax cuts, with their governors arguing that they have sufficient budget flexibility to do so. West Virginia Governor Patrick Morrisey (R) pointed to a $128 million midyear surplus as well as savings from other sources to support his proposed 10% income tax cut. He asserted the proposal was budget-conscious, key to addressing affordability concerns, and necessary to keep West Virginia competitive with neighboring states that recently reduced income taxes.

In Georgia, Governor Brian Kemp (R)—who is pushing to reduce the state’s personal and corporate income tax rate to 4.99%—framed the state’s proposed tax cut as relief the state could afford. “The reason we’ve been able to do this—and three years ahead of schedule—is because of our fiscal discipline.”

Budget pressures

Although this year’s State of the State speeches generally emphasized balanced budgets and stability, governors also warned that fiscal hardship may be on the horizon. Several noted risks from economic uncertainty and rising costs.

In Alaska, which heavily relies on oil revenue, Governor Mike Dunleavy (R) called out oil price volatility, which affects the state’s revenue and its Permanent Fund, as the state’s “greatest challenge” and warned that, “in the next five years, current revenues may not be enough to fund government, especially with low oil prices.”

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Elsewhere, governors from both parties mentioned rising costs in core areas—including education, healthcare, housing, agriculture, energy, and labor—as well as the fiscal pressures of an aging workforce and population growth or decline in their states. “We must take action to bring Medicaid costs to a more sustainable level and protect access for the 1.2 million Coloradans who rely on Medicaid,” said Governor Jared Polis (D). “The numbers are stark … we can’t afford to keep growing Medicaid at its current pace while still funding schools, roads, and public safety.” And Louisiana Governor Jeff Landry (R) warned that “We have more jobs than people ready to fill them,” and the state may experience slowed growth and stalled opportunity if the workforce system doesn’t expand quickly enough to meet demand.

Governors diverge on federal policy changes

Although Republican and Democratic governors highlighted similar long-term challenges, they differed significantly in their views on federal policy changes and how their states should respond.

Democratic governors in at least 14 states argued that tariffs are driving higher costs across the economy and stressing household budgets, small businesses, and state finances. Republican governors, on the other hand, did not directly mention tariffs, but some did point to tax changes in the 2025 federal reconciliation law as a source of economic relief for residents.

Medicaid and healthcare subsidies

Governors also noted that shifts in federal healthcare policy are adding strain to existing Medicaid budget pressures. Many Democrats pointed to significant changes in H.R. 1 that the Congressional Budget Office expects will add 7.5 million Americans to the ranks of the uninsured and to cut $911 billion in federal funding for Medicaid through 2034—as well as to the expiration of Affordable Care Act subsidies that had reduced premiums for millions of people who purchase their own health insurance. Michigan Governor Gretchen Whitmer (D) spelled out the potential ripple effects of these changes: “Even if you don’t get your healthcare through Medicaid or the ACA, we will all be impacted by these big cuts. The domino effects of higher premiums, hospital closures, reduced services, and workforce reductions will impact us all, even if you have good insurance.”

Several Democratic governors outlined how they would address these changes. For example, Rhode Island Governor Dan McKee (D) announced that his budget directs $10 million in state and federal funds to help hospitals manage a rise in uninsured patients and nearly $20 million to support the state’s Medicaid agency in complying with new federal requirements and maintain coverage for Medicaid recipients. But he warned, “No state can fully backfill all the federal cuts coming our way.”

On the other side of the aisle, Oklahoma Governor Kevin Stitt (R) praised the new Medicaid work requirements in H.R. 1, calling them necessary for fostering self-sufficiency and ensuring budget sustainability. He highlighted administrative actions and proposed ballot measures aimed at tightening eligibility, increasing state flexibility over Medicaid expansion, and enabling state lawmakers to more easily modify or end Medicaid expansion by moving it from the state’s constitution into statute and authorizing its repeal if federal funding drops below 90%. Gov. Stitt framed the proposals as necessary to rein in Medicaid costs—which are projected to consume 37% of the state’s annual budget in 10 years—and to “protect the program for those who really need it, not those who should be working.”

Supplemental Nutrition Assistance Program (SNAP)

On another federal policy front, Democratic and Republican governors diverged in their concerns about SNAP, which provides food assistance to low-income households. Several Republican governors expressed their support for federal changes to the program, which include expanded work requirements and state choice for program nutrition standards. Governors in Iowa, Louisiana, Missouri, and West Virginia announced that their states received SNAP Food Restriction Waivers from the U.S. Department of Agriculture that prohibit the use of SNAP benefits to purchase selected non-nutritious foods, such as candy and soda. 

Democratic governors, on the other hand, tended to frame SNAP as a critical safety net program under attack from recent federal actions. Arizona Governor Katie Hobbs (D) said “Washington cut food assistance and then held it hostage during the federal government shutdown,” while Kentucky Governor Andy Beshear (D) warned that federal changes to the program “are going to result in soaring costs and 114,000 Kentuckians are going to go hungry from losing their food assistance.” And the governors in Maryland, Massachusetts, and Kentucky announced that their budgets allocate money—$40 million, $55 million, and $50 million, respectively—to offset SNAP cuts.

Final thoughts

In their 2026 State of the State addresses, governors described an uncertain environment defined by tighter budgets and difficult tradeoffs and the need to bolster the fiscal security of their states’ budgets and their constituent’s personal finances, reflecting a shift from recent years when they touted flush fiscal conditions.

At the same time, however, many states still benefit from strong fiscal cushions, with at least 13 governors trumpeting robust reserves or rainy day funds, and at least 16 mentioned paying down debt, reducing pension liabilities, and receiving strong or upgraded credit ratings.

But even as many states remain on solid fiscal footing, governors warned that those conditions may not last. With federal pandemic aid largely expired, revenue growth stagnating, and spending demands rising, governors of both parties emphasized the need to balance competing priorities while preparing for the long term. As Georgia Gov. Kemp put it, “It is not a question of if hard times will hit our state again. It is simply a question of when.”

Riley Judd works on The Pew Charitable Trusts’ Fiscal 50 project.