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A slight majority of states are better prepared for a recession than they were when the last one hit. Over the past seven years, the median state rainy day fund balance has risen from 1.9 percent of fund expenditures to 5.8 percent, topping the pre-recession level of 4.9 percent, according to the National Association of State Budget Officers (NASBO).
“Rainy day fund balances, in the aggregate, grew steadily in the several years following the Great Recession, and have continued to increase as states have made building reserves a top budget priority,” NASBO said.
As of FY 2017, 26 states had rainy day balances that were higher than they were in FY 2007, before the Great Recession began, according to analysis of NASBO data by the Pew Charitable Trusts.
Texas had the biggest cash reserve in FY 2017, at $10.3 billion, despite a crash in the price of oil in 2014. And in spite of the damage caused by Hurricane Harvey last year, the state expects its reserve to reach $11.9 billion by the end of fiscal 2019.
“Texas is continuing to put money away to make sure we have a rainy day fund the next downturn,” said Chris Bryan, director of communications for the state comptroller’s office. “Texas’s conservative economic leadership is a model to follow [in how to prepare a rainy day fund].”
California also has a healthy reserve. Thanks to a string of balanced budgets stewarded by Gov. Jerry Brown (D) and a constitutional amendment approved by voters in 2014 (Proposition 2), requiring 10 percent of revenues to be placed in a rainy day fund, the Golden State now has the biggest reserve in the country, at almost $14 billion.
“The next recession will be upon California soon enough, but a full rainy day fund and a commitment to prudent one-time spending are the best tools available to guide the state through it,” stated a government report. (YAHOO FINANCE)