States Are Flush With Cash

As state legislators kicked off their 2022 sessions this spring and started planning new budgets, many found that their tax coffers were overflowing. What lawmakers do with that extra money could have long-range consequences.

The excess revenue resulted from a convergence of two windfalls. State tax collections rose sharply in 2021 as the pandemic waned, businesses fully reopened, and consumers started spending again. And the federal government showered states with more than $360 billion as part of the $1.9 trillion American Rescue Plan, passed in March 2021. The passage of President Joe Biden’s $1 trillion infrastructure bill means even more federal taxpayer money for state treasuries in the near future.

All told, state revenues (including federal funds) increased by more than 12 percent in 2021, according to data from the Pew Charitable Trusts. Thirty-two states reported higher than expected revenue in 2021, according to the National Association of State Budget Officers.

As a result, many states now have significant year-over-year budget su