States Face Budget Tightening, Spending Cuts, Hiring Freezes

State budgets across the U.S. are tightening due to slow revenue growth, leading governors to propose spending cuts, hiring freezes, and some tax increases. The National Association of State Budget Officers reported that while general fund spending is expected to hold steady in fiscal 2026, many states are downgrading their revenue projections for the coming year, with expenditure growth outpacing revenues. This financial strain follows the end of federal pandemic aid and an uncertain economic outlook, forcing lawmakers to confront significant budget challenges. Washington Democratic Governor Bob Ferguson, after recently signing a budget with deep spending cuts and tax increases, has directed state agencies to prepare for further austerity measures amid ongoing economic and federal funding uncertainties. Despite these challenges, many states still maintain substantial reserve funds to cushion fiscal pressures. The evolving federal tax policies and spending decisions under the Trump administration are anticipated to further impact state budgets, potentially necessitating mid-year adjustments.