Following a year of record state revenues, most state governments have accumulated “rainy day” funds (RDF) which they can draw on during unexpected revenue shortfalls, such as the economic slowdown due to the COVID-19 pandemic.
The Tax Foundation has created and is updating a webpage “Tracking State Legislative Responses to COVID-19.” A table on the page shows state RDF balances as a percentage of each state’s general fund.
The RDF balances range from zero-point-zero percent in Illinois—which may have only about one million dollars in its reserve, according to Illinois Policy—to Alaska, which has an RDF of 52.6 percent, or more than six months of the state’s general fund needs.
Many states have RDFs of 10 percent or more of budgeted state general fund spending. Texas, for example, has an RDF (called the Economic Stabilization Fund) of 12.9 percent. The state will likely draw down the fund, but should also look for ways to cut nonessential spending, says Cary Cheshire, vice president of Texans for Fiscal Responsibility.
“[J]ust as every Texas family is going over their budget right now and looking for ways to cut back in the midst of this economic uncertainty, Texas lawmakers must do the same with the taxpayer dollars they’ve been entrusted with,” stated Cheshire on March 26.
One place to begin, says Cheshire, is the first item in the budget, more than $25 million for the Texas Commission on the Arts, which makes grants to local arts projects. “That’s enough to cover the salaries of 478 teachers, assuming they make the state average of $53,000,” Cheshire wrote.
Texans for Fiscal Responsibility is soliciting ideas from Texans for government spending cuts to offset the fiscal effects of the pandemic.