The end of the post-pandemic windfall
U.S. states entered 2024 flush with federal aid surpluses. By 2025, those buffers are evaporating. Revenues are flattening while healthcare and pension costs climb. The National Association of State Budget Officers (NASBO) reports that state general-fund spending rose 6.2 percent in 2024, outpacing tax growth.
Table 1. State & Local Finances ($ B)
| Category | 2023 | 2024 | 2025 (f) |
|---|---|---|---|
| Total Revenue | 3,210 | 3,280 | 3,310 |
| Total Expenditure | 3,130 | 3,350 | 3,460 |
| Budget Balance | +80 | –70 | –150 |
Sources: NASBO, Census Bureau.
Table 2. Pension & Debt Obligations (% of State GDP)
| State Avg. | 2015 | 2020 | 2025 (f) |
|---|---|---|---|
| Pension Liability | 8.5 | 9.8 | 11.2 |
| Net Tax-Supported Debt | 2.5 | 2.9 | 3.4 |
Source: Pew Charitable Trusts, NASBO.
Regional divergences
Energy-rich states like Texas and North Dakota retain surpluses, while Illinois, New York, and California confront rising structural deficits. Municipal bond issuance is increasing, but investor appetite is becoming selective.
What business leaders should watch
Infrastructure investment programs could face local cutbacks. Construction, healthcare, and education contractors should anticipate slower payments and greater scrutiny of capital projects.
Strategic implication
Engage early with state agencies and public-private partnership offices. Firms offering cost-sharing, performance-based contracts, or ESG-linked financing will gain competitive advantage as state budgets tighten.