With only the money in their rainy day funds, states could collectively run their government operations for a median of 23.2 days as of the end of fiscal year 2018, compared to 16.6 days before the Great Recession, according to updated data from The Pew Charitable Trusts’ “Fiscal 50” interactive report.
States saved more “thanks to a jump in tax revenue collections,” the authors of the report state. Additional revenue enabled states to increase their rainy day funds for the eighth straight year, reaching a record 50-state total of $59.9 billion. Overall, rainy day funds constitute the largest portion of states’ total reserves and balances, Pew notes.
New Hampshire is one of only eight states whose rainy day funds could cover more days’ worth of spending than at any point since at least 2000. It ranks 6th, behind California (48.1 days), Colorado (41.6), Oregon (35.1), Vermont (31.0), and Maine (29.9), with 26.7 days. Ohio (23.3) and Hawaii (17.6) rounded out the top eight. All except Ohio added to their savings, Pew reports. California saved nearly $5.5 billion in 2018 – the largest of any state.
New Hampshire’s rainy day fund of $110 million (26.7 days) was also greater than the 50-state median of 23.2 days.
“As states regain fiscal ground lost in the recession, policymakers face competing pressures to catch up on investments and spending postponed because of the economic downturn, as well as replenishing their rainy day funds to prepare for the next inevitable downturn,” Justin Theal, an officer at the Pew Charitable Trusts, told Watchdog.org.
“At the end of fiscal 2018, New Hampshire’s tax revenue was 3.3 percent above the peak level it recorded in 2007 before dropping in the recession, after adjusting for inflation,” Theal added. “The state was one of 36 in which tax revenue collections were higher in fiscal 2018 than before receipts plunged in the downturn.”
More than half of U.S. states – 26 – saved enough in their rainy day funds to cover a greater share of spending in fiscal 2018 than in fiscal 2007. According to data collected by the National Association of State Budget Officers, 32 states saved a combined $9.8 billion toward their rainy day funds in fiscal 2018.
Wyoming had the most savings in its rainy day fund, equivalent to 366.9 days of operating costs, surpassing Alaska to take the top spot for the first time. States with no money in their rainy day funds at the end of the 2018 budget year were Kansas, Montana and New Jersey.
“With an estimated total reserve balance equal to 12.7 percent of spending, now is an opportune time for New Hampshire to analyze how much it might need to offset the next possible recession” Stephen Bailey, who manages Pew’s policy work to help states apply best practices to their rainy day fund design, told Watchdog.org.
“A growing trend among states is to ‘stress test’ their budget, which involves projecting what the budget gap would be in the event a moderate or severe recession,” Bailey added. “This can provide valuable information to policymakers as they balance building reserves against other important priorities.”
Rainy day funds are not the only source of funding available to state leaders in times of financial crisis, Pew notes. “States also softened the blow to their budgets after tax revenue plunged in the last downturn by turning to ending balances, which are the dollars left over in what functions as a state’s main checking account – the general fund.”
Rainy day funds and ending balances make up a state’s total balances, which help measure a state’s available funds.