State Fund for Rainy Days | How healthy is your state’s Rainy Day fund?
Business cycles can have significant impacts on state revenues, but states can prepare for the inevitable downturns during good times by putting money aside in an income stabilization fund or funds for days. of rain, as they are often called. Funding levels and the actual names of these funds may vary from state to state, but rainy day funds have increasingly become a standard feature of state budgeting tools.
This week’s card examines what percentage of a state’s general fund expenditure could be covered by money from its rainy day fund (s). Since state revenues and budgets vary widely, looking at this percentage instead of just dollar amounts allows us to compare how much a state has saved and what exactly those savings mean.
Of the 50 states, Wyoming has the strongest rainy day account, covering 109% of its annual general fund spending with $ 1.6 billion. Alaska comes in second with 52.6% of its annual spending ($ 2.3 billion). North Dakota (30% and $ 727 million) and New Mexico (26.8% and $ 2 billion) follow. Notably, each of these states is heavily dependent on revenues from oil and gas production and the extraction of other resources. Due to the income volatility associated with these industries, which were struggling before the COVID-19[female[feminine An economic contraction linked to the pandemic, these states often deposit a substantial amount of excess income from severance pay and related taxes into rainy day funds in years when prices and production are high.
Kansas and Illinois have the least funds for rainy days – Illinois with very little (just $ 4 million) and Kansas with nothing at all. Kansas only implemented its rainy day fund (the Fiscal Stabilization Fund) recently, in 2016, one of the last states to do so. While the plan was to create the fund in 2017, deposits were not to begin until fiscal 2020, after the state would have accrued income from the 2017 tax increases. As such, the fund is still empty. Pennsylvania and New Jersey are only slightly above this level, each with savings to cover 1 percent of their annual expenses.
Due to data availability, figures for Michigan, North Carolina, Oklahoma, and Wisconsin are as of 2019 and figures for Georgia are as of 2018. All other information is as of 2020.
Was this page useful for you?
The Tax Foundation works hard to provide insightful analysis of tax policy. Our work depends on the support of members of the public like you. Would you consider contributing to our work?
Contribute to the Tax Foundation
Let us know how we can better serve you!
We are working hard to make our analysis as useful as possible. Would you consider telling us more about how we can do better?