Changing Fiscal Policy in the Seventh District

State governments make major changes to their fiscal systems only infrequently. When they do take place, changes are driven by such forces as recessions, changing demographics, regional decline, and sustained revenue growth. The Seventh District has experienced all of these events over the past 15–20 years. A period of sustained economic and revenue growth during the mid-1990s has followed on the heels of regional decline, rising costs of public services, and recession. District states have reacted to their good fortunes by initiating innovative changes to both their tax systems and spending programs. This Chicago Fed Letter discusses how the current economic expansion is lifting state government revenues in the District and the varied fiscal responses of state governments.