Pew Charitable Trusts: How a Pandemic-Era Surge in Tax Collections Drove a Revenue Wave—and What It Means for Future State Budgets

When the COVID-19 pandemic ground the economy to a near-halt in spring 2020, states scrambled to adjust to an anticipated multiyear decline with drastic spending cuts and revised revenue projections. But fears of a debilitating recession were short-lived thanks, in part, to billions of dollars in aid from the federal government. Instead of extended shortfalls, from mid-2020 through the end of 2022, states experienced an unprecedented revenue wave. Collections recovered faster and at a sharper rate than states had projected in 2020 and continued to grow at historic rates, and lawmakers in many states have used the new revenue to boost reserves, pay down debt, and implement tax cuts and spending initiatives.

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