U.S. State budget management strategies during the COVID-19 pandemic

The COVID-19 pandemic created unprecedented pressure on public budgets worldwide, as surging demand for public spending coincided with declining revenues. This study uses panel data from U.S. state governments to analyze the factors driving their fiscal responses and compares strategies employed during the COVID-19 pandemic to those used in the Great Recession. Findings reveal that during the pandemic, states used fewer strategies, were less likely to implement across-the-board cuts, and avoided workforce-related measures. Projected budget gaps influenced the number of strategies adopted and the likelihood of expenditure cuts, but not the choice of specific measures. Federal aid showed limited association with the number or type of strategies employed, suggesting the need for more timely and flexible assistance. Political ideology similarly was not systematically related to the type or number of balancing strategies employed.