The Tax Foundation released a survey this past month, showing how much money states had in their rainy day funds to deal with economic emergencies. Not surprisingly, this study of fiscal preparedness shows Iowa as one of the national leaders.
The Washington-based foundation, which examines tax policy at the local, state and federal levels, looked at how much a state had in its fund as compared to their FY 2013 budget. For Iowa, the Tax Foundation determined that the Cash Reserve Fund and the Economic Emergency Fund totaled 9.93 percent of the state’s fiscal year 2013 budget.
Here are the leading states:
State Rainy Day Fund balance as percentage of FY 2013 budget: Alaska, 211.16 percent; Wyoming, 53.13 percent; West Virginia, 20.91 percent; Texas, 18.58 percent; North Dakota, 12.64 percent; New Mexico, 10.77 percent; South Dakota, 10.38 percent; Iowa, 9.93 percent; Nebraska, 9.85 percent; South Carolina, 6.04 percent
It is interesting to note that the top six states have energy production as one of its largest industries. And all states in the top ten currently have a Republican governor.
In comparison to neighboring states, Iowa’s reserve fund position is quite strong. Only South Dakota ranks higher. Minnesota (3.48 percent) and Missouri (3.28 percent) find themselves in the middle of the rankings. And then there are those who are at the other end of the spectrum. Kansas, Wisconsin and - not surprisingly - Illinois were among the seven states that have no constitutionally- or statutorily-required rainy day fund.
In making their analysis public, the Tax Foundation noted that their position was that states should have rainy days funds that are at least 18 percent of a state’s budget. Only four states met this standard under their analysis.
But the Tax Foundation study does not tell the complete story. It does not include any reference to ending balances of state budgets that are not a portion of a rainy day fund. An example would be South Dakota, which just reported that they would have an ending balance of $23 million in their state budget at the end of FY 2013. And then there is Iowa.
According to LSA’s estimates after the governor’s action on the budget, the state would have an ending balance of $779.1 million for FY 2013. This amount does not include any of the Cash Reserve Fund or the Economic Emergency Fund. When combined with the two funds, the state would have $1.401 billion in reserves at the end of FY 2013. This amounts to 22.28 percent of the FY 2013 budget. Not bad for a state that was facing a $900 million budget shortfall less than three years ago.
If you have any questions or concerns, please contact me. Home phone: 515-382-2352, E-mail: Dave.Deyoe@legis.iowa.gov