The historic decline in fertility will touch nearly every area of state budgets in the coming years. Some fiscal effects have already emerged, while others will be relatively minor or won’t be felt for decades. The implications for individual states vary: Those with shrinking workforces that rely more than other states on taxes sensitive to population declines—such as income and sales taxes—are especially vulnerable to budget pressures. Other demographic shifts such as migration will also affect many sources of revenue and spending.
Today, most states find themselves in a relatively healthy fiscal position, with many enjoying robust budget surpluses.61 Fewer births in recent years have contributed appreciable cost savings. If low fertility persists, however, states will need to look more for other ways to grow their tax bases or they could face challenges over the long term.
The Long-Term Decline in Fertility—and What It Means for State Budgets
Conclusion
will touch nearly every area of state budgetsin the coming years. Somefiscal effects have already emerged, while others will be relatively minor or won’t be felt for decades. The implications for individual states vary: Those with shrinking workforces that rely more than other states on taxes sensitive to population declines—such as income and sales taxes—are especially vulnerable to budget pressures. Other demographic shifts such as migration will also affect many sources of revenue and spending.If low fertility persists, however, states will need to look more for other ways to grow their tax basesor they could face challenges over the long term.