This month’s featured article from TEF.

Are We Ready for a Rainy Day?

By Amy K. Frantz

Shouldn’t we all aspire to set aside some funds in case of an emergency? If I need a new roof following a hail storm or I’m suddenly faced with a health crisis, ideally, I would like to have some savings set aside to take care of those unforeseen bills.  Shouldn’t states aspire to the same ideal?

Erick M. Elder of the Mercatus Center at George Mason University released a report earlier this year titled “Weathering the Next Recession: How Prepared Are the 50 States?” in which he evaluates the ability of each state to cope should a recession cause a revenue shortfall.  Elder writes, “A rainy day fund (RDF), sometimes referred to as a budget stabilization fund, is a tool used by almost all the states in the United States as a way to help mitigate fiscal stress during economic downturns by helping the states to smooth their spending and tax collections.”

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