GUEST COLUMN.

It’s a truism that demography is destiny—and that includes the financial destiny of states. 

The population of the 50 states grew at its fastest rate in nearly a quarter of a century last year, increasing by almost 1% between mid-2023 and mid-2024, and nearly all states gained residents—driven mostly by domestic and international migration. But these numbers tell the story of the immediate past, not the future.  

The long-term U.S. population trend is for slower growth. And this will almost inevitably lead to a number of difficult challenges for state policymakers, as  population shifts are tied to states’ finances—affecting both revenue and spending.

In fact, the population boost in both 2023 and 2024 obscures the demographic outlook of most states. Population growth nationally has been trending downward for decades, with most states grappling with steady slowdowns. In fact, over the past 15 years, the total population has grown only 0.69% per year. And during those years, three states—West Virginia, Illinois, and Mississippi—actually lost residents. West Virginia’s population declined by almost 78,000, equal to 0.3% annually; Illinois lost over 86,000, or 0.05% a year; and the population of Mississippi fell by about 16,000 people, or 0.04% a year. 

The steady decline in population is expected to accelerate in coming years.  Data from the University of Virginia’s Weldon Cooper Center for Public Service projects that while only three states—Illinois, Mississippi, and West Virginia—will lose population from 2020 to 2030, that number is expected to increase sixfold over the 2030s and reach 24 by 2050. (These projections are based on the 2020 decennial census data and don’t reflect the pandemic-era swings in deaths, births, or domestic and international migration, nor recent policy shifts on immigration.) The Census Bureau also forecasts a steady slowdown in national population growth, which it attributes largely to the combination of declining fertility rates and rising death rates as baby boomers age. 

Populations change because of shifts in the number of new residents—newcomers (from other states and abroad) and babies—versus those who died or moved away. For most of the 15 years ending in July 2024, the 50-state population growth was largely due to births outpacing deaths. But ever since the baby boom of 1946 to 1964, birth rates have generally been declining and the country has aged. As a result, migration—both domestic and international—plays a much more significant role in determining whether a state’s population grows or shrinks. 

According to the Congressional Budget Office, although net immigration (the number of people coming from other countries minus the number of people who move out of the U.S.) is projected to account for all population growth in the United States beginning in 2033, it’s expected to slow in the years ahead. And the new federal administration’s proposed immigration policies add uncertainty to the complex mix of economic, policy, and geopolitical trends that shape migration patterns. 

The natural impact of a declining growth in population inexorably leads to a rise in the average age of Americans, which will mean that income tax and sales tax revenues may drop as health care and pension costs grow. 

The Weldon Cooper Center projections show that from 2020 to 2050, the population of adults ages 65 and over will increase in nearly every state, while K-12-, college-, and working-age populations will decline in almost half of states. These issues may be lessened in states that have growing populations of 25-to-64-year-olds, such as Utah and Texas; more residents in this age group typically translates to a larger labor force and more people who, through their taxes, help cover public costs for aging residents. But only about half of states are projected to experience steady, though often slow, growth in this age group in the coming decades. And an expanding working-age population may present issues of its own, including housing availability and cost.

A shrinking or slow-growing population can be both a cause and an effect of weakened economic prospects. Less economic activity can limit state revenue collections. And although a smaller population can lead to a reduction in some spending, it also means fewer residents are available to help cover the costs of long-standing commitments, such as debt and state employee retirement benefits.

On the other hand, more people usually means more workers and consumers contributing to economic activity as they take jobs and buy goods and services—which generates more tax revenue. A growing economy, in turn, can attract more workers and their families. The size of a state’s population, and annual changes to it, also influences how much the state will receive from some federal grants. 

All this leaves states with a pressing challenge: how to sustain economic growth and fiscal health in the face of demographic headwinds. Doing so will not be easy. But understanding the change that’s coming is the first step toward dealing with the issues that are coming and toward trying to ensure continued prosperity.

#StateandLocalGovernmentManagement #StateandLocalGovernmentPerformance #StateDemocgraphicChanges #StateSlowingPopulationGrowth #StateWorkingAgePopulationDecline #StatePopulationProjection #PewCharitableTrusts #PewFiscal50 #FederalImmigrationPolicyImpact #StateSlowPopulationGrowthTaxImpact #StateSlowPopulationGrowthEconomicImpact #StateAgingIssues #StateDemographicChangeImpact #StateTaxRevenuePerformance #StateTaxManagement #StatePopulationProjections #WestVirginiaPopulationLoss #MississippiPopulationLoss #IllinoisPopulationLoss #StatePopulationLossImpact #WeldonCooperCenterforPublic Service #BandGGuestColumn #BarrettandGreeneInc