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State Budget Stabilization Funds in an Expanding U.S. Economy

19 Jun 07

Despite a relatively healthy economy during fiscal 2007, most states are socking money away for the next recession.

The U.S. economy has now been expanding for a few years, with employment and personal incomes on the rise in most states. But memories of the previous recession are still fresh in the minds of many state officials when they are deciding how to balance their budgets. In fiscal 2007, all but eight states put money aside in their budget stabilization funds, or rainy day funds. Having money in these funds allows states to resist raising taxes during years when revenues lag expenses, and thus avoid putting more downward pressure on a state economy. Not surprisingly, some of the states that were hit hardest by the last recession have also put the most money into their rainy day funds in fiscal 2007.

	States with the Highest Budget Stabilization Funds in Fiscal 2007
	Percent of State Revenues in Rainy Day Fund	Annual Employment Growth in 2001-03
Alaska	69.3%	1.8%
Texas	17.3%	-0.2%
Maryland	11.0%	0.4%
Massachusetts	8.8%	-1.3%
Connecticut	8.2%	-1.0%
Minnesota	6.8%	-0.3%
Florida	4.5%	0.8%
Ohio	4.0%	-1.4%
Virginia	3.2%	-0.2%
New York	2.0%	-0.9%

by Larissa Duzhansky

U.S. Regional Services

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