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According to Pew Charitable Trusts, rainy day funds hit all-time
highs in 38 states at the end of fiscal year 2023, including in
Illinois. But most states expect their total financial cushions
to decline by the end of the current budget year.
After consecutive years of sizable increases, states’ combined
rainy day funds decreased by over $4 billion in fiscal 2023 from
fiscal 2022’s record high to $160 billion, according to
estimates collected by the National Association of State Budget
Officers between February and May of this year.
Page Forrest, senior associate with The Pew Charitable Trusts’
state fiscal policy project, said the pandemic had a big impact
on states' budgetary decisions.
“States really took advantage of the upswing in revenue that we
saw in fiscal 2021 and 2022 and used that to put a substantial
amount of funds in their reserves, which is why we are still
seeing those record levels,” said Forrest.
At the lowest point in 2017 during Illinois’ budget impasse, the
rainy day fund had only $48,000, which would fund the state for
less than 30 seconds.
In November, State Comptroller Susana Mendoza deposited $11.5
million into the state’s Rainy Day Fund, bringing the total to
$2.005 billion.
Despite the improvement, Forrest said Illinois is still ranked
47th in the country on the amount of days the government could
run on the rainy day fund.
“They could run for almost two weeks now, however for context,
the median capacity for a state is 46 days, so Illinois is still
lagging substantially behind the national median,” said Forrest.
On the other hand, Wyoming’s state government could run 306 days
on its rainy day fund.
The analysis points out that there is no one-size-fits-all rule
for states on when and how much to save. Pew’s research shows
the optimal savings target of state rainy day funds depends on
several factors, including the defined purpose of the funds,
changes in state’s tax revenues and the potential increase in
spending during economic hard times.
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