Journal Article

Use of rainy day funds in Third District states


Abstract: Rainy day fund is the popular name for special reserve funds employed by all but three states (Arkansas, Kansas, and Montana) to provide a more flexible response to emergencies and/or cyclical fiscal extremes. This is the primary policy tool designed specifically to help states address fiscal stresses generated by recessions. By transferring a portion of budget surpluses to their rainy day funds during years of strong economic growth and rising revenues, states can reduce the need to raise taxes and cut services during years of weak growth and declining revenues.

Keywords: Rainy day fund; Fiscal stress; Recessions;

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Provider: Federal Reserve Bank of Philadelphia

Part of Series: Research Rap Special Report

Publication Date: 2011

Issue: Jan

Order Number: 1