NCPA - National Center for Policy Analysis

States Drawing On Their Reserves

March 30, 2000

States are lowering their taxes. But at the same time they are boosting spending. The result is that they are eating into their "rainy day" reserves, says economist Michael Moran of Daiwa Securities America Inc.

  • In the current fiscal year, 42 states have cut taxes by a total of $5.2 billion -- on top of $7 billion in cuts last year and average cuts of $3.8 billion in the prior four years.
  • Meanwhile, they boosted spending by 7.7 percent last year and 5.5 percent this year.
  • So in just two years, the level of rainy day funds has plummeted from over 9 percent of state outlays to an estimated 5.6 percent at the end of the current fiscal year in June.

Source: Gene Koretz, "Less Coming In, More Going Out," Business Week, April 3, 2000.


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