(The Center Square) – Rainy day funds in most states are projected to have reached new highs by the end of fiscal year 2022, but Illinois’ reserves still lag the rest of the country.
An analysis by Pew Charitable Trusts shows that 33 states project increases in the length of time they could run government operations on rainy day funds alone, compared with a year earlier.
After an early pandemic decline in rainy day fund balances, states estimated that their combined savings would reach a record $136.5 billion by the close of fiscal year 2022, according to preliminary figures reported to the National Association of State Budget Officers between March and May of this year.
Pew Officer Justin Theal said Illinois put some money in the reserve fund, but it still lags the rest of the country.
“The state’s reserve fund reached a billion dollars for the first time, which would increase the number of days the state could operate on using that reserve fund alone to about eight days,” Theal said.
That is compared to Wyoming's 349 days.
At least three states – Iowa, Connecticut, and Oklahoma – are projected to have filled their rainy day funds to their maximum balances, meaning that additional dollars that would ordinarily have been directed to those fund balances were redirected to other uses.
Pew said policymakers face several looming challenges, including weakening economic growth, high inflation, and the tapering of federal aid. That places an emphasis on the amount of money in rainy day funds. Illinois’ rainy day fund is around $1 billion, one of the lowest in the country.
“Despite record savings, just 24 states had enough in their rainy day fund to weather a moderate recession without having to resort to severe spending cuts or tax increases to close potential budget gaps,” Theal said.
Theal points to a recent Moody’s Analytics Report that shows that Illinois is in the worst shape financially of all states to weather a recession.
Illinois technically does not have a rainy day fund as defined by Pew Charitable Trusts. Illinois’ Budget Stabilization Fund has a repayment provision that requires all withdrawals from the fund to be repaid in full within a fiscal year, making it in effect a working-cash fund rather than a rainy day fund.