Publication Date: October 2006
Publisher: Tax Policy Center
Author(s): Elaine Maag; Alison McCarthy
Research Area: Economics
Keywords: Economy; State and Local Finance; Tax Policy; State and Local Issues
States use rainy day funds (RDFs), or budget stabilization funds, as a cushion against financial shocks. Every state except Vermont has some sort of balanced budget requirement so that, unlike the federal government, they must balance expenditures and revenues in any given budget cycle (typically one year). States can have RDFs that allow money to be carried over from good years to lean years. Five states--Arkansas, Colorado, Illinois, Kansas, and Montana--do not have RDFs.