States Should Improve the Design of Their Rainy Day Funds
End Notes
[1] Abigail Magnus and Michael Johnson, Jr. provided research assistance for this report.
[2] The American Rescue Plan prohibits states from depositing the aid it provides in rainy day funds.
[3] Sharon Parrott et al., “Building an Equitable Recovery Requires Investing in Children, Supporting Workers, and Expanding Health Coverage,” CBPP, March 24, 2021, https://www.cbpp.org/research/poverty-and-inequality/building-an-equitable-recovery-requires-investing-in-children.
[4] Erica Williams and Cortney Sanders, “3 Principles for an Antiracist, Equitable State Response to COVID-19 – and a Stronger Recovery,” CBPP, updated April 29, 2021, https://www.cbpp.org/research/state-budget-and-tax/3-principles-for-an-antiracist-equitable-state-response-to-covid-19.
[5] Heather Long and Abha Bhatterai, “As layoffs skyrocket, the holes in America’s safety net are becoming apparent,” Washington Post, March 19, 2020, https://www.washingtonpost.com/business/2020/03/19/unemployment-insurance-today-coronavirus/.
[6] Leib Sutcher, Linda Darling-Hammond, and Desiree Carver-Thomas, “A Coming Crisis in Teaching? Teacher Supply, Demand, and Shortages in the U.S.,” Learning Policy Institute, September 15, 2016, https://learningpolicyinstitute.org/product/coming-crisis-teaching.
[7] Matthew Menendez et al., “The Steep Costs of Criminal Justice Fees and Fines,” Brennan Center for Justice, November 21, 2019.
[8] Erica Williams, “States Should Adopt Policies to Help Dismantle Racial Barriers to Broader Prosperity,” CBPP, September 13, 2018, https://www.cbpp.org/blog/states-should-adopt-policies-to-help-dismantle-racial-barriers-to-broader-prosperity.
[9] Pew Charitable Trusts, “Rainy Day Funds and State Credit Ratings,” May 2017, https://www.pewtrusts.org/-/media/assets/2017/05/statesfiscalhealth_creditratingsreport.pdf.
[10] Reserves here refer to both the balance in rainy day funds and unrestricted general fund ending balances.
[11] Elizabeth McNichol, “Out of Balance: Cuts in Spending have Been States’ Primary Response to Budget Gaps, Harming the Nation’s Economy,” CBPP, April 18, 2012, https://www.cbpp.org/research/out-of-balance.
[12] National Association of State Budget Officers, “The Fiscal Survey of the States: Fall 2020,” December 2020, https://higherlogicdownload.s3.amazonaws.com/NASBO/9d2d2db1-c943-4f1b-b750-0fca152d64c2/UploadedImages/Fiscal%20Survey/NASBO_Fall_2020_Fiscal_Survey_of_States_S.pdf.
[13] Elise Schmelzer and Sam Tabachnik, “Gov. Jared Polis limits evictions, cuts immediate state spending by $228.7 million,” Denver Post, May 7, 2020, https://www.denverpost.com/2020/05/01/polis-coronavirus-covid-state-spending/; Jack Suntrup, “Parson announces more Missouri budget cuts: K-12 education takes a $133 million hit,” St. Louis Post-Dispatch, June 1, 2020, https://www.stltoday.com/news/local/govt-and-politics/parson-announces-more-missouri-budget-cuts-k-12-education-takes-a-133-million-hit/article_c4dd46f2-d201-5abc-8e14-c6795e62d496.html; Randy Ludlow, “Coronavirus in Ohio: $775 million in budget cuts due to pandemic include $300 million reduction to schools,” Columbus Dispatch, May 5, 2020, https://www.dispatch.com/news/20200505/coronavirus-in-ohio-775-million-in-budget-cuts-due-to-pandemic-include-300-million-reduction-to-schools.
[14] Tami Luhby, “Struggling states put off tough cuts in hopes of a congressional rescue,” CNN, June 30, 2020, https://www.cnn.com/2020/06/30/politics/state-budget-cuts-congress-lifeline/index.html
[15] Wesley Tharpe, “States, Localities Need More Federal Aid to Avert Deepening Budget Crisis,” CBPP, July 21, 2020, https://www.cbpp.org/blog/states-localities-need-more-federal-aid-to-avert-deepening-budget-crisis.
[16] David Cooper and Julia Wolfe, “Cuts to the State and Local Public Sector Will Disproportionately Harm Women and Black Workers,” Economic Policy Institute, July 9, 2020. https://www.epi.org/blog/cuts-to-the-state-and-local-public-sector-will-disproportionately-harm-women-and-black-workers/.
[17] Troy Kinsey, “DeSantis Signs $92.2B State Budget, Vetoes Record $1B in Spending,” Spectrum News, July 6, 2020, https://www.baynews9.com/fl/tampa/news/2020/06/29/gov--desantis-signs--92-2b-state-budget--vetoes-record--1b-in-spending.
[18] James Salzer, “Kemp signs $26 billion budget as Georgia faces an uncertain fiscal future,” Atlanta Journal-Constitution, June 30, 2020, https://www.ajc.com/news/state--regional-govt--politics/kemp-signs-billion-budget-state-faces-uncertain-fiscal-future/d9UngiJ5G7r2MV51VObNxJ/; Danny Kanso, “Sine Die: Overview of Georgia’s 2022 Fiscal Year Budget,” Georgia Budget and Policy Institute, April 9, 2021. https://gbpi.org/sine-die-overview-of-georgias-2022-fiscal-year-budget/.
[19] Andrew Davey, “Inside Our Budget Blues: A Nevada Legislature Special Report,” Nevada Today, July 14, 2020, https://nevada-today.com/inside-our-budget-blues-a-nevada-legislature-special-report; Sam Metz, “Nevada passes cuts to health care, education amid pandemic,” AP News, July 19, 2020, https://apnews.com/article/d5fc6be1935c7d7b60a363ada5008a01.
[20] Associated Press, “Nevada lawmakers OK budgets, prep for end-of-session sprint,” May 1, 2021, https://lasvegassun.com/news/2021/may/01/nevada-lawmakers-ok-budgets-prep-for-end-of-sessio/; Riley Snyder et al., “Sisolak Proposes $8.68 billion budget restoring cuts to Medicaid, other state programs,” Nevada Independent, January 18 2021, https://thenevadaindependent.com/article/sisolak-proposes-8-68-billion-budget-restoring-cuts-to-medicaid-other-state-programs; Ed Komenda and Sam Metz, “Nevada proposes $130 million in education cuts, hopes for federal relief,” Reno Gazette Journal, January 18, 2021, https://www.rgj.com/story/news/2021/01/19/covid-nevada-budget-proposal-130-million-education-cuts-pandemic/4178935001/.
[21] Wendy Patton, “Pandemic budget cuts could mean more in store in 2021,” Policy Matters Ohio, August 26, 2020, https://www.policymattersohio.org/press-room/2020/08/26/pandemic-budget-cuts-could-mean-more-in-store-in-2021.
[22] Randy Ludlow, “DeWine restores $260 million in pandemic-related cuts to Ohio K-12 schools, universities,” Columbia Dispatch, January 22, 2021, https://www.dispatch.com/story/news/coronavirus/2021/01/22/ohio-gov-mike-dewine-restore-budget-cuts-k-12-schools-universities-coronavirus-pandemic/6678781002/; Jo Ingles, “DeWine Orders $390 Million Ohio Budget Cut, But Adds Money For Education,” Statehouse News Bureau, January 22, 2021, https://www.statenews.org/post/dewine-orders-390-million-ohio-budget-cut-adds-money-education.
[23] Dirk VanderHart, “Gov. Brown’s budget proposes prison closures and cuts to healthcare providers,” Oregon Public Broadcasting, December 1, 2020, https://www.opb.org/article/2020/12/01/oregon-governor-kate-brown-budget-proposal/
[24] Richard C. Auxier, “To Understand How COVID-19 Affected States, Compare Governors’ New Budgets to Their Pre-Pandemic Plans,” Tax Policy Center, March 8, 2021, https://www.taxpolicycenter.org/taxvox/understand-how-covid-19-affected-states-compare-governors-new-budgets-their-pre-pandemic.
[25] Ibid.
[26] Tax Policy Center, “What are state rainy day funds, and how do they work?” March 2020, https://www.taxpolicycenter.org/briefing-book/what-are-state-rainy-day-funds-and-how-do-they-work.
[27] Elizabeth McNichol and Kwame Boadi, “Why and How States Should Strengthen Their Rainy Day Funds,” CBPP, February 3, 2011, https://www.cbpp.org/cms/?fa=view&id=3387.
[28] Arizona, California, Delaware, Florida, Hawai’i, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Mississippi, Missouri, Montana, New Hampshire, New Jersey, New York, Ohio, Oregon, Rhode Island, South Carolina, South Dakota, Texas, Utah, Vermont, Washington, and Wisconsin.
[29] By cap, we mean that the laws that require transfers into the rainy day fund no longer apply once the fund has reached a specified percentage of the general fund.
[30] Elizabeth McNichol and Kwame Boadi, “Why and How States Should Strengthen Their Rainy Day Funds,” CBPP, February 3, 2011, https://www.cbpp.org/research/why-and-how-states-should-strengthen-their-rainy-day-funds?fa=view&id=3387.
[31] Pew Charitable Trusts, “Managing Uncertainty: How State Budgeting Can Smooth Revenue Volatility,” February 4, 2014, https://www.pewtrusts.org/en/research-and-analysis/reports/2014/02/04/managing-uncertainty
[32] Josh Goodman, “Budget Stress Testing Helps States Prepare for Fiscal Distress,” Pew Charitable Trusts, April 9, 2020, https://www.pewtrusts.org/en/research-and-analysis/articles/2020/04/09/budget-stress-testing-helps-states-prepare-for-fiscal-distress.