When people have to tap into their rainy day fund, it’s to account for surprise expenses. Sometimes we have to fix the furnace when it breaks down, pay for Junior’s field trip, or pay for a vet bill when the dog swallows a sock. Governments have rainy day funds for the same reasons, albeit on a larger scale.
A recently published report from the National Association of State Budget Officers (NASBO) highlights the importance of efficiently maximizing revenue streams. The report finds that state budgets still face numerous challenges, despite the fact that state governments overall currently have greater amounts saved in rainy day funds than they did in the run-up to the Great Recession in 2007.
Even though rainy day funds, which can be used to help meet budget demands and cover shortfalls in times of decreased tax revenues, are at higher levels now than they were a decade ago, the total balance in state funds actually decreased slightly from 2016 to 2017. Additionally, there is wide variation in rainy day funds between states, with at least five states showing zero balances in their rainy day funds.
The report asserts that states have experienced sluggish general fund revenue growth of 2.4 percent in fiscal 2017, with 33 states reporting collections below budget projections. While revenue is growing at a measured pace, state government financial leaders should take the time to examine their own processes and procedures: Are they taking every opportunity to demonstrate the fiscal responsibility they expect of their constituents? By holding constituents justly accountable for their tax burdens, government budgets will be more likely to be balanced. These things can assist state government financial leaders in making ends meet in tough budgetary times.
Managing state government rainy day funds presents a myriad of challenges in how the state addresses the varying needs of its constituents. Given all of the challenges facing state budget offices, maximizing revenue is of utmost importance. IC System has a proven history of partnering with state and local government entities to help improve their economic outcomes by providing debt collection services which leverage technology, emphasize data security, and promote innovation.
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About the Author: Ben Fisher
Ben Fisher has been with IC System, one of the largest receivables management companies in the United States, since 2013. He has honed his extensive industry knowledge through his varied roles for the company within departments such as operations, client service, and marketing.