This is something that always been relevant, but became exceedingly important from the COVID-19 related recession.
The balance of the rainy day fund has been steadily growing to around $460 million today. This represents a healthy eight percent, which is comparable with the national average of general fund expenditures. In 2013, it stood at just $32 million, about 0.7 percent of all expenses.
|Year||Rainy-day balance||% of expenses|
As for neighboring states, Mississippi is doing better than most. Alabama is the only state where the rainy day fund makes up a larger chunk of their budget, at 10.9 percent. Tennessee, Louisiana, and Arkansas have rainy day funds of 6.8 percent, 5.8 percent, and 2.7 percent, respectively.
|State||% of expenses|
“Rainy day funds are a reflection of deliberate state policy choices by elected officials. In recent years, governors and state lawmakers have focused on rebuilding their states’ rainy day funds. Rainy day fund balances, in the aggregate, have grown substantially since the Great Recession, reaching $75.5 billion in fiscal 2019 (with a median balance of 7.3 percent as a share of general fund spending). Before the COVID crisis, states were expecting to end fiscal 2020 with a median rainy day fund balance of 7.8 percent, a new all-time high. By comparison, going into the last recession, the median rainy day fund balance in fiscal 2007 was 4.6 percent,” the report notes.
Mississippi’s rainy day fund, while smart fiscal policy, has been a bit of a political football with some lawmakers criticizing the state for saving while they push for more government spending during better economic days. But this prudence paid off when the coronavirus pandemic and the associated economic collapse hit earlier this year. Yes, the federal government has dumped boats of cash in Mississippi and every other state, but that can’t and shouldn’t be what any state turns to during bad times.
Especially in Mississippi, a state that relies on the federal government more than most states.
We’ve learned from the Great Recession to be prepared. And that is what will help the state be prepared fiscally for the future. It is about making smart fiscal decisions, particularly during good times, resisting the temptation to spend every dollar you have, and living within your means. It’s something households do every day.
It’s something all states could and should do.