(The Center Square) – While numerous states tried to deal with budget gaps by tapping into rainy day funds, Illinois did not have that luxury.
According to Pew Charitable Trusts, the total amount set aside in state rainy day funds fell for the first time since the Great Recession. State rainy day funds nationwide had a balance of $71.6 billion in fiscal year 2020, an amount second only to the pre-pandemic record-setting total of $78.7 billion.
“These are really a state’s best line of defense for eliminating budget gaps without harming residents or their economies during a recession or in response to unforeseen emergencies like the coronavirus pandemic,” said Justin Theal, an officer with Pew.
There is a wide variation in how far each state’s rainy day funds could stretch, from enough to run government operations for almost a year in Wyoming to less than one-tenth of a day in Illinois. The median amount at the start of this fiscal year could cover 28.5 days worth of general fund spending.
Fifteen states tapped into a total of $12.4 billion from their rainy day funds in the first budget year disrupted by COVID-19: Alaska, California, Georgia, Hawaii, Indiana, Maine, Michigan, Nevada, New Jersey, New Mexico, North Carolina, Oklahoma, Oregon, Rhone Island and Texas.
Some withdrew only a small share, but others tapped substantial amounts to plug budget holes that suddenly emerged.
The threat of big year-end budget gaps lessened as the national economy began bouncing back and state tax revenue began recovering. According to Pew, as of February 2021, tax collections in 29 states, including Illinois, had grown enough to offset initial losses since the start of the pandemic.
Sis states’ cumulative tax collections grew enough to offset previous losses for the first time in February: Illinois (0.1%), Ohio (0.1%), Iowa (0.2%), Massachusetts (0.2%), Delaware (0.4%), and New York (0.5%).
The next milestones for state tax revenue will be recovering enough to outgrow inflation and then show progress in regaining growth above pre-pandemic levels.