States reported strong revenue growth in the first quarter of 2021, but there is still large variation in revenue performance across states. Over a 12-month period (April 2020 through March 2021), state total tax revenues increased 0.6 percent compared to the same period one year earlier. Preliminary figures for the second quarter of 2021 indicate nearly 65 percent growth in total state tax revenues but this largely reflects the steep declines in revenues in the second quarter of 2020 caused by the beginning of the pandemic as well as delayed income tax due dates.

Overall state tax revenues were stronger during the pandemic than initially feared, in part due to the generous federal stimulus packages that have injected trillions of dollars into the economy. However, states still need to be conservative in their budget and forecasting because of the high level of uncertainty still remaining related to both economic and public health conditions.