January 15, 2013 – The last decade’s roller-coaster economy has highlighted the importance of state “rainy day funds” — budget reserves for when recessions or other unexpected events cause revenue declines or spending increases. States with rainy day funds were able to avert over $20 billion in cuts to services and/or tax increases in the recession of the early 2000s. Rainy day funds also helped states avoid service cuts and tax increases in the most recent recession. States would have weathered the storms better if those funds had been bigger.
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