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With the Great Recession behind us and economic conditions slowly improving across the country, now is the time for states to assess their preparedness for future downturns. Rather than waiting for another crisis to occur, ITEP’s new policy brief explains why states should make structural improvements to their rainy day funds right now.
If the economy falters and states are caught without enough reserves to cover the resulting budget shortfalls, policymakers will be faced with having to enact temporary tax increases or potentially painful budget cuts. An adequate, accessible rainy day fund can help lessen the need for these types of difficult budget decisions.
But as the brief explains, deposits into state rainy day funds should not come at the cost of inadequate funding and support of critical public services today. State rainy day funds are at their best when the need to save is carefully balanced against spending priorities. When this happens, rainy day funds are an indispensable part of a responsible state budget.
Read the brief to learn more about rainy day issues such as size limits and rules for the deposit, withdrawal, and replenishment of funds.