State Rainy Day Funds Grow, but Total Balances Lag.

• Position: News & Numbers

More than half of states have rebuilt their rainy day funds since the Great Recession, but fewer have been able to match the total balances they had before the downturn, Pew Charitable Trusts reports. At the end of fiscal 2017, states' total general fund budgets, including rainy day funds, were funded at a level that would be able to run government operations for a median of 29.3 days. That compares to a median of 41.3 days in fiscal 2007, before the recession.

Fiscal 2017 was a tight budget year, and several states tapped their reserves; however, at year's end, 26 states had larger rainy day funds, as a share of operating costs, than they did before the recession. Still, most states' budgets had a smaller financial cushion, overall; only 14 states could had enough to cover more days of operating costs than in fiscal 2007, in total.

"After tax revenue plunged in the 2007-09 downturn, states tapped both their savings and ending balances to help plug huge gaps that opened in their budgets. As state revenue has slowly recovered, so have reserves and balances--largely because policymakers have made efforts to set aside more money in state rainy day funds over the past eight years of economic recovery. The median number of days' worth of spending held in these dedicated reserves has risen each year since fiscal 2011," according to Pew.

States' total balances have improved since their low point in fiscal 2009, but they've been more volatile. At the end of fiscal 2017, 35 states had a smaller total financial cushion than a year earlier, following two years of slow and uneven tax revenue growth that left less money in many states' ending balances and leading several states to tap rainy day funds to address the shortfalls.

"Reserves in rainy day funds (also called budget stabilization funds) were the largest component of states' financial cushions in fiscal 2017, accounting for more than $2 of every $3 of total balances. The importance of rainy day funds in helping to gird against budget uncertainties has grown since the recession," Pew reported.

Nationally, state rainy day funds totaled $49.6 billion in fiscal 2017--enough to run operations for a median of 19.8 days in fiscal 2017, or 5.4 percent of general fund spending. That compares with a median of 16.6 days, or 4.6 percent of spending, in...