Connecticut”™s record $3.1 billion rainy day fund could run the state government for nearly 70 days ”“ the fifth-best level in the country, according to a new report.
The Pew Charitable Trusts analysis credits the unprecedented federal aid and smaller-than-anticipated tax revenue shortfalls with helping to build most states”™ war chests despite the pandemic-driven recession in early 2020.
In March of this year, the American Rescue Plan Act began distributing nearly $2 trillion in federal aid for taxpayers, businesses, and state and local governments, while tax revenue had reached the benchmark of recovering its initial pandemic losses in a majority of states and nationwide.
The report”™s estimates show that 28 states expect their rainy day fund balances to grow in fiscal 2021 from the previous year, increasing the national total by a net amount of $4.6 billion to a new high of $82.3 billion.
Based on fiscal 2021 estimated savings, 21 of the aforementioned 28 states also posted increases in the number of days they could run government operations using rainy day funds alone compared with the previous year.
“Because the size of state budgets varies widely, it is fairer to compare the strength of rainy day funds by measuring how many days”™ worth of spending each state”™s savings could cover rather than by ranking funds by dollar amounts,” Pew wrote. “Days”™ worth of spending increases when rainy day fund balances grow — except when expenditures rise faster than savings.”
Connecticut”™s 69.7 days is bested only by Wyoming (301 days), North Dakota (105.6), West Virginia (75.8) and Alaska (73.4). At the bottom was Illinois, which could operate for less than one-tenth of a day on its rainy day fund. The 50-state median was 29.4 days.
