Crafting a state budget is never an easy task, even in the best of times. Policymakers must balance spending needs, predict revenue trends, and prioritize numerous urgent needs while maintaining a balanced budget. These demands can make it challenging for fiscal leaders to look beyond the immediate budget cycle and consider how major shifts in the status quo could impact their states’ fiscal future. With significant demographic, environmental, and technological changes on the horizon, states need to find ways to anticipate and address the potential fiscal impact of these emerging risks.
A recent article on the Pew website discusses how public budgeting will face new challenges in the future due to these emerging trends. The Pew Trusts’ project on “Managing Fiscal Risks” outlines several ways that state budgets will be affected by these risks. For example, an aging population will lead to increased healthcare costs and decreased revenue from taxes on younger workers who are not contributing as much as they used to. Climate-related spending needs will also increase as states invest in infrastructure to mitigate the effects of extreme weather events and natural disasters. Cybersecurity concerns will require additional resources to protect against cyber attacks and protect sensitive data.
To ensure fiscal stability in the face of evolving risks, it is crucial for states to plan ahead and manage these future budget challenges. This may involve finding new sources of revenue or cutting back on unnecessary expenses. It also requires policymakers to be proactive in addressing emerging risks before they become major problems. By doing so, states can maintain a balanced budget while also preparing for a more uncertain future.