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Fiscal Conditions Are Strong, but Uncertainty Looms

Forecast ’23: The top issues in fiscal affairs for the 2023 legislative session.

By NCSL Staff  |  April 21, 2023

State fiscal situations continue to rebound as the COVID-19-induced recession subsides, though lingering inflation adds an element of uncertainty.

States faced steep revenue losses beginning in 2020 as consumers stayed home, some industries shuttered and many Americans lost their jobs. However, the ability of many employees to work from home helped shield states from some personal income tax losses. Consumers also proved willing to continue spending, particularly on home goods and other items that are subject to state sales taxes. Overall, revenues were sharply lower in fiscal year 2020 than states had projected, but the impact was less than many experts feared at the start of the pandemic.

Forecast ’23

This story is part of a State Legislatures News special report examining the hot topics and legislative trends that will dominate state lawmakers’ time in 2023.

Forecast home

As economies reopened, state revenues rebounded more quickly than anticipated in FY 2021 and have remained strong in FY 2022. Strong capital gains tax revenue bolstered some states, and increased oil and gas prices have helped economies in energy-dependent states initially hit hard by the pandemic. However, as states such as Alaska, New Mexico and Wyoming have noted, oil and gas revenues have been volatile recently, creating challenges and uncertainty.

Hot Topic — Avoiding the Fiscal Cliff

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