Balancing the Books: State Fiscal Strategies in 2025

Balancing the Books: State Fiscal Strategies in 2025

Nearly every state and territory will be in session by March, with fiscal policy emerging as a top priority for policymakers in 2025. This focus stems from significant budget gaps as states address deficits in critical areas like education and infrastructure, compounded by the expiration of federal pandemic aid.

Fiscal changes, whether through legislation or constitutional amendment, can be affected by increasing the cost of living and raising taxes, among other challenges. Tax revenue fell during the 2024 fiscal year, making it the first consecutive year of decline since the Great Recession in 2007-09. In 38 states, tax revenue is down from the 15-year growth trend. Despite this, state tax revenue is on track to restabilize, as the declines in 2024 were more gradual than those in 2023.

Top Issues

Housing

Bills addressing high housing costs were a focal point of 2024’s legislative sessions and are expected to increase in 2025. States may implement building projects and make zoning and permitting changes to strengthen their fiscal health.

Public Schools

Legislators are expected to explore new ways to fund K-12 schools in 2025, with schools becoming increasingly challenged by declining enrollments and reallocated federal benefits.

Gas Tax

Once a reliable source of funding for states, increased fuel efficiency and electric vehicles are lessening the impact of gas tax revenue. Legislators will likely look at new solutions to increase transportation funding support.

Tax Revenue Decline

Federal assistance through the American Rescue Plan Act will no longer support states in 2025, leading to deficits that may cause future challenges. As policymakers address program needs, priorities and fiscal strategies may shift accordingly.

Natural Disasters

States may create specific funding methods for natural disasters. In California, these programs allocate resources to mitigation activities, instead of pulling resources from firefighting activities. Other states use loans for those expected to receive federal assistance or provide incentives for local governments who invest in mitigation efforts.

State leaders must reassess their fiscal plans as they approach the end of American Rescue Plan funding and navigate the impact of tax cuts. They must also account for extreme fluctuations caused by the pandemic and its lingering effects in subsequent years. In particular, states in the Midwest and West are projected to cut local property taxes in 2025. States like California and Washington face significant budget gaps in the years ahead.

Washington

In Washington, state law requires lawmakers to balance the budget over four years. Heading into this year, the deficit is projected to top $12 billion over the next four years, meaning some combination of tax increases and spending cuts may be necessary. 

Newly elected Washington Gov. Bob Ferguson has proposed a 6% reduction to most state agencies and a 3% cut to higher education to meet the state’s budget goals.

California

During the 2024-25 budget process, California lawmakers began with a nearly balanced budget but faced a projected deficit of approximately $2 billion. Under state law, the governor is required to submit a balanced budget proposal by January 10 each year.

In response to the shortfall, legislators identified around $11 billion in spending cuts and $15 billion in additional solutions, which included $5.5 billion in temporary revenue increases and a $7 billion draw from the state’s rainy-day fund.

Louisiana

State leaders may look to examples like Louisiana, which adopted similar cuts last year, to better evaluate the impact of such changes.

Last November, lawmakers in Louisiana cut approximately $1.3 billion after approving a flat 3% income tax rate.

Beyond fiscal legislation, many bills can impact a state’s economic health. Legislators can mitigate expenditures by amending a bill to reduce its scope or required costs, implementing a “no appropriation” clause or requiring the use of outside funding when possible.

Analysts are projecting that state budgets will tighten; especially as federal pandemic aid is no longer available. Additional concerns include declining transportation revenue due to increased electric vehicle use and the adoption of AI to standardize operations and manage education costs. Even with changes in 2024, states like New York will still need to address statewide deficits in the 2025 legislative sessions. Such financial challenges underscore broader trends in state budgets, particularly as general funds, for the first time since 2011, experienced a slight decline for fiscal year 2025, according to the National Association of State Budget Officers.

While most states’ tax collections dipped below their 15-year trend, 12 states came in above their projected 15-year mark: Alaska (118.5% above trend), New Mexico (16.5% above), Wyoming (10.9%), Nevada (4%), Rhode Island (3.7%), South Carolina (3%), Montana (2.7%), North Dakota (2%), Texas (1.7%), Alabama (0.6%), Florida (0.5%), and Nebraska (0.2%).

As policymakers anticipate the challenges of 2025, fiscal policy will remain at the forefront of legislative agendas. In response, innovative solutions and careful planning will be essential to stabilize budgets and foster long-term economic growth — efforts crucial to supporting the states.

Artificial Intelligence and Public Comment

Public comment periods ensure government bodies receive adequate input from citizens, interested parties and even other governmental bodies when they look to change or promulgate rules and regulations. As artificial intelligence gains in popularity, leaders have the opportunity to promote new technology while also protecting constituents.

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CSG Announces 2025 National Officers

The Council of State Governments elected four state leaders as 2025 national officers at its national conference in December. They include Hawaii Gov. Josh Green as CSG National President and Illinois Sen. Elgie Sims as CSG National Chair.

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Military 101: The U.S. Space Force

The U.S. Space Force, the youngest branch of the Armed Forces, has grown significantly in its first four years, with six active-duty bases supporting missions like space launches, cybersecurity and weather satellites, while also establishing its own uniforms, song and culture.

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Military 101: The U.S. Army

Military 101: The U.S. Army

Recon Training at Fort Indiantown Gap, Pennsylvania, on June 8, 2024. Photo credit: Sgt. Du-Marc Mills, 109th Mobile Public Affairs Detachment.

By Joe Paul, Policy Analyst

The United States Army is a core branch of the United States Armed Forces. The Army engages enemy ground forces and identifies, seizes and controls the land, resources and population of a designated adversary. The Army is split into two components: the active force and the reserve force. The Reserves consist of the United States Army Reserve and the Army National Guard.

The Army has operational and institutional missions. The operational Army is the fighting force comprised of armies, corps, divisions and more that conduct worldwide operations. The institutional Army supports the operational component by providing the infrastructure needed to raise, train, equip and otherwise ensure the Army’s readiness. The institutional Army can be divided into training and industrial bases, with the training base developing the knowledge, skills and abilities of the soldier and the industrial base providing the equipment and logistics needed.

Mission

The Army’s Mission is “to deploy, fight and win our Nation’s wars by providing ready, prompt and sustained land dominance” by Army forces across the full spectrum of conflict as part of the Joint Force.   

History

The Army was established on June 14, 1775, making it older than the Declaration of Independence by more than a year. The new Continental Army drew upon the traditions of the local militia and the professional standards similar to the British Army. Following actions by the British government, especially the Coercive Acts of 1774, New England citizens attacked British forces at the Battle of Lexington and Concord. This initial militia became the basis for the modern Army.

The Second Continental Congress convened in May 1775, and on June 14, 1775, passed a resolution establishing companies of riflemen across the colonies to join existing soldiers in Boston. The following day former President George Washington was appointed commander in chief. After the Revolutionary War, the Army was reduced to one regiment consisting of eight infantry companies and two of artillery and charged with safeguarding the new nation’s military arms and stores.

The Army played a vital role in the War of 1812 with an attempt to invade Canada and later victory against the British in the Battle of New Orleans. The Army was also deployed in the Mexican American War and won decisively at Vera Cruz. The Civil War saw major technological advances in warfare from munitions to arms. The development of mechanized guns and breach loading munitions increased the ability to inflict terrible damage. Additionally, the Army was used throughout the West to force Native Americans onto reservations. The Spanish-American War, perhaps most known for former President Theodore Roosevelt and the Rough Riders’ charge up San Juan Hill, was the last major engagement during the 1800s.

World War I saw the Army fighting alongside the British and French forces against the Imperial German and the Austro-Hungarian forces. The United States committed infantry and machine gun and artillery units to the cause. The First Army was organized and activated under General John Pershing on July 4, 1918. The U.S. forces assisted in operations up and down the lines from the Franco-Belgium border and Luxembourg to the Italian border with the Austro-Hungarian Empire.

During WWII, the U.S. Army operated globally. From the front lines against Nazi Germany to the War in the Pacific and all points in-between, U.S. Army soldiers played a key role in the liberation of France, Italy, the Philippines, North Africa, and other countries.

Branches of the Army

Today, there are 17 branches of the Army. Each branch is a key component of the Total Army concept.  

  • Adjutant General (AG) — The adjutant general manages all personnel systems within the Army that impact readiness, morale and career.

  • Air Defense Artillery (ADA) — The air defense artillery protects against aircraft and missiles with systems like the Patriot anti-missile system and the Stinger.

  • Armor (AR) — The armor takes its heritage from cavalries. It performs scout and reconnaissance missions and are often leaders in areas of conflict.

  • Aviation (AV) — Aviation is, in raw numbers, the largest air force in the U.S. military. It consists of transport, scout and attack helicopters used for a wide utility of missions.

  • Chemical Corps (CM) — Chemical corps operates in the realm of logistics, training, intelligence, research and analysis of chemical threats.

  • Corps of Engineers (EN) — The Corps of Engineers provides much of the infrastructure combat, construction, topographic and civil works, as well as environmental and other engineering specialties.
  • Cyber Corps (ARCYBER) — The cyber corps this branch protects the U.S. Department of Defense networks from cyber threats, both foreign and domestic.

  • Field Artillery (FA) — Field artillery provides the support to engage an enemy at a distance with cannons, rockets, and missiles and coordinates all supporting fire including air and naval.

  • Finance (FC) — Finance controls all aspects of pay, allowances, accounting and contracting.

  • Infantry (IN) — Infantry is the core of the Army’s strength. They maintain a constant state of readiness in preparation for combat across the globe.

  • Medical Services (MED) — Medical services include doctors, dentists and nurses, as well as the support personnel, facilities, supplies and administration of medical services, provided to soldiers and their families.

  • Military Intelligence (MI) — Military intelligence is a large branch which monitors and provides tactical, counterintelligence, signals and electronic security, surveillance, and aerial reconnaissance.
  • Military Police (MP) — Military police are specialists in protecting “rear area” assets, which are those farthest from conflict, as well law enforcement, criminal investigations, counterterrorism, physical security and corrections.

  • Ordnance (OD) — This branch develops, produces or acquires, along with supporting, the Army’s weapon systems, ammunitions, missiles and wheeled and tracked vehicles.

  • Quartermaster (QM) — The quartermaster plans and directs all resources providing food, water, petroleum, repair parts, weapon systems and other services such as laundry, telephone and mail.

  • Signal (SC) — The signal corps maintains and creates the communication and information technology used across the Army, including radios, cell phones, lasers and satellites.

  • Transportation (TC) — Armies must move people, weapons, equipment, and supplies across land, sea and air. The transportation corps operates all the Army’s transport systems to make sure resources are where they need to be, when they need to be there.

Each branch of the military operates its own elite forces in addition to their regular enlisted units. The special operations unit of the Army includes the Rangers, which date back to the 1700s with Robert Rogers’ Rangers. The Night Stalkers of the Special Operations Aviation Regiment run international missions from helicopters in the dark. They are aviation experts who use aircraft tactics to surprise the enemy anywhere at any time. The Green Berets, who wage and excel at guerilla war missions that can take place in any environment, are U.S. Army Special Forces.

Army aviators in helicopters take flight.
Army aviators take flight near Washington, D.C., on June 4, 2024.
Photo credit: George Markfelder, Joint Task Force — National Capital Region.
Command Structure
Chart going left to right of the U.S. Army Command Structure.

The command structure of the Army consists of teams, squads, platoons, company, battalions, brigades, divisions, corps and armies. A team is a smaller unit usually consisting of four soldiers led by a sergeant. A squad is two to three teams and is led by a staff sergeant, and a second or first lieutenant commands a platoon, which is two to three squads. A company, made up of three to four platoons, is led by a captain. Three to five companies gather to form a battalion, which are led by a lieutenant colonel. A brigade is commanded by a colonel and is made up of three or more battalions. A division consists of three brigades and is commanded by a major general. Corps are made up of as many as 40,000 soldiers led by a 3-star lieutenant general. An army is made up of multiple Corps.

Rank

The rank structure of the Army consists of enlisted personnel, warrant and commissioned officers. Enlisted ranks range from private to sergeant major. Officer ranks range from second lieutenant to general.

Enlisted Ranks:                    

  • Private (E-1)
  • Private (E-2)
  • Private First Class (E-3)
  • Corporal (E-4)
  • Sergeant (E-5)
  • Staff Sergeant (E-6)
  • Sergeant First Class (E-7)
  • Master Sergeant (E-8)
  • First Sergeant (E-8)
  • Sergeant Major (E-9)
  • Command Sergeant Major (E-9)

Officer Ranks:

  • Second Lieutenant (O-1)
  • First Lieutenant (O-2)
  • Captain (O-3)
  • Major (O-4)
  • Lieutenant Colonel (O-5)
  • Colonel (O-6)
  • Brigadier General (O-7)
  • Major General (O-8)
  • Lieutenant General (O-9)
  • General (O-10)

The highest-ranking enlisted member of the Army is Sergeant Major of the Army, while the highest-ranking officer of the Army is the General of the Army. Army soldiers can also hold rank as a warrant officer in specialties from W-1 through W-5. As highly specialized officers, warrant officers are officer-level technical specialists in a particular field that provide leadership, training and extensive knowledge to the Army in their occupational specialty. Five-star generals only exist during wartime. The last five-star general was Omar N. Bradley, who the U.S. Senate elevated, with consent, in 1950. Gen. Bradley died in 1981 and no other U.S. military officer in any branch has been promoted to 5-star since.

Functional Categories

In addition to the branches, the Army also assigns functional areas to align with branches consistent with joint doctrine. In functional areas, units are grouped and categorized by their functions to facilitate competencies required in today’s modern Army. Functional areas include:

  1. Maneuver, Fires & Effects, which brings together units with similar battlefield applications or complementary roles, such as infantry, armor, aviation, artillery, engineers, military police and others.
  2. Operations Support, which brings together military intelligence and signals which impact networks, overall intelligence and surveillance, planning, development and education.
  3. Force Sustainment, which brings together all the soldier support roles from logistics and adjutant general, to the medical, chaplain and judge advocates general.

The Art of Civility

Illinois Sen. Elgie Sims will serve as the 2025 CSG National Chair. As a public servant, Sims believes there is a responsibility to exemplify civility and decorum in political spaces, not only for the sake of effective governance but also for the democracy that the next generation will inherit.

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Military 101: Understanding Veterans Affairs (VA) Benefits

Military 101: Understanding Veterans Affairs (VA) Benefits

By Morgan Thomas, Policy Associate

Members of the United States Armed Forces have access to a multitude of benefits. The Veterans Benefits Administration provides VA benefits under the U.S. Department of Veterans Affairs, some of which include retirement benefits, disability compensation, educational assistance and health care. Whether you are Active Duty or a member of the reserve component, a service member may qualify for one or more of these VA benefits.

Retirement Benefits

One of the main attractions to a career in the military is the retirement benefits. A federal retirement in the military grants you access to retirement pay, base Commissaries, Base Exchange and retired health care plans such as Tricare Prime and Tricare for Life. Any service member may retire with federal retirement benefits after completing a minimum of 20 years of Total Active Federal Military Service (TAFMS), which is used to calculate how much qualifying active-duty time a service member has accrued. An active-duty pension begins immediately after a service member retires. There are several exceptions to the 20-year rule, of which includes disability retirements or service members who qualify for early retirement under the Temporary Early Retirement Authority (TERRA).

Members of the reserves and National Guard may also retire after 20 years of service. The reserve component uses a point system under the Reserve Retirement System to calculate their TAFMS time. However, a reserve pension does not typically begin until a retired service member turns 60, with the exception of prior active-duty military service.

Additionally, active-duty service members and members of the reserve component can contribute to their retirement without completing a 20-year service time commitment through the Blended Retirement System (BRS). The BRS was first introduced as a part of the National Defense Authorization Act of 2016 and combines the traditional military pension plan with a Thrift Savings Plan (TSP). TSP is a retirement savings plan for service members that allows them to make contributions throughout their service even if they decide not to serve for 20 years. If an individual chooses, a TSP can be rolled into another 401(k) after separating from the military. Alternatively, a service member may leave their funds in their TSP account until they are ready to retire. Service members enlisted in the armed forces after January 1, 2018, were automatically enrolled in the TSP program.

Education Benefits

In addition to retirement benefits, one of the main attractions to a career in the armed forces is VA education benefits. Some of the most notable VA education benefits are the Post-9/11 GI Bill, the Montgomery GI Bill Active Duty, the Montgomery GI Bill Selected Reserve and the Veteran Readiness and Employment (VR&E) program. Each of these education benefits offers its own unique coverage of tuition, fees, a book stipend, housing stipend, or a combination of one or more. Currently, the Post-9/11 GI Bill is the only education program that can be or dependent once certain qualifications by the service member have been met. Each education benefit has its own unique set of requirements based on a member’s service component.

VA education benefits are available to active-duty service members, the National Guard and the reserves with qualifying active-duty service time. In addition to VA education benefits, National Guard members may receive up to 100% state tuition assistance for attending specific schools within a state or may be eligible for additional state education benefits.

Disability Compensation

Many service members may obtain a service-related injury while serving on active duty. Disability compensation is a monthly, tax-free benefit that is paid to Veterans who receive at least a 10% disability rating due to injuries or diseases that were incurred or aggravated while serving on active duty or active-duty training. A service member may also receive disability compensation for post-service disabilities that appear later but result from their time in service.

Members of the National Guard and the reserves may also receive VA disability compensation so long as their service-connected disability was incurred while serving on federally qualifying active-duty orders. A Guardsman may be eligible to receive state disability compensation for injuries incurred while not serving on federal orders.

Healthcare

Active – duty service members, Guardsmen, reservists, retirees and their dependents – and in some cases former spouses – are eligible to enroll in a health care program called TRICARE provides access to both civilian healthcare networks and the Military Health System (MHS), which is comprised of Department of Defense military hospitals and clinics worldwide. The program provides coverage access through authorized civilian health network providers based on region and non-authorized providers, depending on which TRICARE health plan an eligible service member has. TRICARE also offers the TRICARE Overseas Program for active – duty service members and their eligible family members who are located in geographical areas outside of the U.S.

There are also additional VA healthcare benefits aside from TRICARE such as the Program of Comprehensive Assistance for Family Caregivers (PCAFC) and the Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA). TRICARE, PCAFC, CHAMPVA and other VA healthcare programs are available to eligible service members and their families in both the active duty and reserve components. 

Additional Benefits

The VA also offers additional benefits such as VA home loans and life insurance, as well as benefits specific to . All VA benefit programs have their own unique eligibility requirements for active-duty service members and members of the reserve component.

Members of the National Guard may be eligible to receive some or all VA benefits based on qualifying active-duty service. For VA benefits, federal active-duty service is determined by the length of full-time active-duty service on Title 10 or Title 32 orders (link to Military 101: Orders). It is important to note that a service member may not receive access to one or more VA benefits if they receive a from any branch of service.

For more information on benefits eligibility, visit the U.S. Department of Veterans Affairs benefits webpage.

Model Career Programs Set Kentucky Apart as Apprenticeship Ambassador

In 2022, the Kentucky Department of Education’s Office of Career and Technical Education was among the inaugural selections of the U.S. Department of Labor’s Apprenticeship Ambassador Initiative. Kentucky’s commitment to high-quality apprenticeship programs is setting a national example, with the state recognized for its innovative Tech Ready Apprentices for Careers in Kentucky (TRACK) initiative and Registered Apprenticeship Programs.

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