State Budgets

Key Points
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Key Points
  • Tax and Expenditure Limitations, like Colorado’s Taxpayer Bill of Rights, have been shown to stabilize budgets over time.
  • Taxpayers deserve to know how their dollars are being spent. All levels of government should establish user-friendly websites, allowing citizens to search through a robust database of all financial transactions.
  • Governments should budget for outcomes, identifying core functions and measuring results.
  • In 2003, Washington State used outcome-based budgeting to close a $2.4 billion deficit without raising taxes.

SBS LogoSmart budgeting is vital to a state’s financial health. The ALEC State Budget Reform Toolkit offers more than 20 policy ideas for addressing today’s shortfalls in a forthright manner, without resorting to budget gimmicks or damaging tax increases.

One way to stabilize budgets over time is to embrace Tax and Expenditure Limitations (TELs). The most effective TELs, like Colorado’s Taxpayer Bill of Rights (TABOR), require voter approval to raise taxes, issue debt or spend surplus revenue. Policy reforms like TABOR give hardworking taxpayers more protection and ensure that state budget growth is stabilized at a reasonable level.

Restoring accountability to government spending is another way to mend state budgets over the long run. Since ALEC first adopted its model Taxpayer Transparency Act in 2007, nearly every state has launched a budget transparency website, allowing citizens to more easily find out how their tax dollars are spent. All levels of government, including school districts and municipalities, would do well to follow suit.

More fundamentally, government should budget for outcomes. This means identifying the core functions of state government and measuring results. In 2003, Washington State used outcome-based budgeting to close a $2.4 billion deficit without raising taxes.

Articles

In the News

States are the Secret Weapon in the Federal Tax Debate: Jonathan Williams on The Hugh Hewitt Show

Jonathan Williams/June 24, 2025
Tax Reform

The Ten Golden Rules of Taxation: Jonathan Williams on American Radio Journal

Tax Reform

Rich States Poor States Turns Eighteen: Across the States Special Edition

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Publications

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Model Policies

  • State Constitutional Amendment To Oppose New State Taxes, Increased Spending, and Debt Without Voter Approval Draft

    WHEREAS, States through their respective constitutional amendment processes should adopt fiscal responsibility amendments that (I) impose limits on the amount of money government can tax and spend, (II) tie the growth of state revenue to a rate of population growth plus inflation, and (III) require any increases above an established…

  • Resolution Recognizing The Seriousness Of The National Debt And Its Threat To National Security Draft

    WHEREAS, In March 2025, the outstanding public debt of the U.S. totaled more than $36 trillion, with public debt equaling 124 percent of gross domestic product and the debt owed per citizen rising to $107,000; WHEREAS, More than $8 trillion of the federal debt is owned by individuals not located…

  • Federal Funds Oversight Act Final

    (1) State agency federal funding requirements. (a) Prior to accepting federal funding, the state budget office and the agency which will be charged with accepting the federal funding shall provide a report to the governor, state legislature, auditor general, state treasurer and the Independent Fiscal Office (or relevant…

  • Resolution Urging Congress to Protect Consumer Privacy in Banking and Financial Transactions Final

    Resolution Urging Congress to Protect Consumer Privacy in Banking and Financial Transactions WHEREAS, the Biden Administration and some in Congress have proposed changes to tax information reporting which would require financial institutions to provide the Internal Revenue Service reports of incoming and outgoing transactions from every customer financial…

  • Statement of Principles on ARPA Aid to State Governments Final

    Statement of Principles Temporary Funds Require Temporary Spending History reveals that federal spending and bailouts are not a “free lunch” for states. Academic research shows that federal aid to the states increases both state spending and overall tax burdens. If state leaders spend temporary federal funds, the increased spending should…

  • Statement of Principles on Sound Rainy Day Fund Practices Final

    Guiding Principles of State Rainy Day Funds The American Legislative Exchange Council (ALEC) is committed to developing state budgetary policies that foster an economy that works for all, empowering people to earn success and realize their potential. One way that a legislature can ensure this goal is by preparing for…

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Task Forces

Tax and Fiscal Policy

The ALEC Tax and Fiscal Policy Task Force is dedicated to researching and promoting sound policy…

Press Releases

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