Publication Date: February 2008
Publisher: Center on Budget and Policy Priorities (Washington, D.C.)
Author(s): Elizabeth McNichol
Research Area: Banking and finance; Government
Keywords: Economic projections; State budgets; Recession
After they emerged from the fiscal crisis earlier in the decade, many states began preparing for the next economic downturn by setting aside "rainy day funds," or reserve accounts designed for use when revenues decline or expenditures increase unexpectedly because of downturns, natural disasters, or other events. A rainy day fund serves as a state’s first line of defense against the budget pressures caused by declining revenues and rising need for public services during a downturn. The next downturn appears to have arrived.
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