Pennsylvania puts money in ‘rainy day fund’ for first time in years
Gov. Tom Wolf announced Thursday that Pennsylvania made a $22 million payment into its so-called rainy day fund, bringing the fund’s balance to $22.5 million.
The payment was the first significant deposit into the account since 2009, when the state drained it of $755 million amid the Great Recession.
“This deposit into the rainy day fund helps stabilize our budget for the first time in nearly a decade and exceeds some pre-budget estimates that the fund would receive $14 million,” Gov. Tom Wolf said in a statement. “And while some states are borrowing from their funds or making no contributions, Pennsylvania is making a $22 million deposit.”
Still, the fund would only cover Pennsylvania’s bills for a quarter of a day, making it one of the smallest reserve funds in the country, said Jon Moody, a research officer with Pew Charitable Trusts, a nonprofit research organization that tracks state budget stabilization funds.
That’s up from a tenth of a day before the deposit, Moody said. The national median for the funds is 20.5 days of operation, he said.
As of the middle of last year, Pennsylvania’s fund exceeded only those of New Jersey, Montana, Kansas and Georgia, according to Pew figures.
The funds help states avoid raising taxes or cutting spending during economic downturns and they are one thing credit rating agencies consider in their ratings, said Steve Bailey, a Pew manager. The agencies downgraded Pennsylvania’s credit amid a budget standoff last year.
This year, the General Assembly and Gov. Wolf passed the budget on time. A provision in the budget sets aside 50 percent of the budget surplus for the year for the fund.
“This is a good step for the state, and it’s starting to show a commitment to savings,” Moody said.
More states are moving to another way of saving, setting aside money when revenue is above trends rather than at the end of surplus years, Bailey said. Before the recession, 12 states saved that way; now 20 do, he said, suggesting Pennsylvania consider the switch.
Building the reserves is important, he said, because “rainy day funds are meant to be used. it’s a matter of not if, but when.”