There’s a lot of churn in state budgets this year, but the bottom line is clear: tighter budgets are ahead for most states. As a result, governors and legislatures—with a few exceptions—are approaching Fiscal Year 2027 (FY 27) with cautious or constrained funding priorities.
The warning signs are clearly shown on the Table below. Twenty-three states have declining or near-flat spending in FY 27. That’s an increase from only 11 states with declining or near-flat spending in FY 26. These 23 state budgets include fewer one-time expenditures and limited increases in recurring spending. The belt-tightening illustrates the growing pressure state leaders face as economic growth slows, tax cuts kick in, inflation rises, and service costs increase.
And there isn't much optimism in the states about spending growth in the coming year, either. Twenty states are expecting spending growth of less than 5% in FY 27; a level of expectations that is no improvement over those of FY 26.
The states SSTI identified as having flat with some reduced spending in TBED for FY 27 are ones that had higher TBED spending in FY 26 due to one-time appropriations or federal funding, and related program cuts or elimination, while state funding for core economic development agencies or programs remained flat or mixed (slight increases/decreases) between the two fiscal years. States with FY 27 TBED funding designated as “flat with some increased spending” are ones where their core economic development agencies or programs are allocated flat or mixed funding in FY 27 as compared to FY 26, and the addition of new one-time or increased funding for governor- or lawmaker-proposed TBED or innovation initiatives.
There are a few states expecting 5-10% spending growth in FY 27, but down from 13 states in FY 26 that were expecting the same amount of spending growth.
And the two states (Texas [FY25-27] and Virginia [FY26-28]) that top the nation in spending growth optimism is down from six that shared that level of optimism in FY 26.
Trends in State Budgets and TBED Spending
States with blank entries have not passed a budget yet
