ILLINOIS (IRN) — A lesser-mentioned consequence of the budget battle between Democrats in the General Assembly and then-Gov. Bruce Rauner was the depletion of Illinois’ rainy day fund, which still sits nearly empty.
A state’s rainy day fund is used to avoid having to make cuts or tax hikes in the event of a sudden drop in revenue like what many states saw during the recession. In 2017, Illinois lawmakers voted to drain the state’s Budget Stabilization Fund and include the hundreds of millions of dollars that were in it to keep services going during the budget battle. Today, there’s less than a percentage of Illinois’ annual budget in that fund.
Justin Theal, an officer with Pew Charitable Trusts, said that goes against the national trend. Most other states have been bolstering their funds during times of higher revenue.
“The state had about $10 million in its rainy day fund, or the equivalent of just one-tenth of one day’s worth of operating cost,” he said. “Fiscal Year 2018 saw thirty-two states add nearly $10 billion to their rainy day funds. That’s largely the result of a healthy economy, robust stock market returns, specific state policy actions, and at least a portion of that was due to tax revenue growth from the recent federal tax reform package.”
Pew’s annual report on the matter shows the median number of days a state could operate solely on rainy day funds, regardless of how unlikely, is 23.2 days. This is the eighth consecutive year that states increased their funds. In total, states have a collective $59.9 billion.
Having little-to-no money in a state’s rainy day chest is not ignored by credit rating agencies, which can make it more expensive for states to borrow in the future.
“Having a robust rainy day fund is something that the credit agencies track very closely,” Theal said.
States that rely on income tax or natural resources as their primary source of income typically have larger funds, Theal said, because those income sources tend to be more volatile. Alaska, for example, had $2.6 billion, enough to run government operations for 208 days.
Gov. J.B. Pritzker’s budget proposal for the coming year proposes to put $100 million into the state’s Budget Stabilization Fund annually, but only after passing a progressive tax, which can’t take effect until at least 2021.