Rainy Day Fund needs restocked
Pennsylvania’s Rainy Day Fund still hasn’t recovered from having been caught in the “storms” of recession and otherwise worsening state finances over much of the past decade.
Ten years ago, the fund had a positive balance of $755 million. However, now, due to recession-related withdrawals and a persistent money shortage that prohibited a resumption of deposits until last year, the fund’s current balance is a paltry $22 million.
That amount, among the smallest of emergency-fund balances of the 50 states, wouldn’t go very far toward sustaining the commonwealth, were another economic emergency to occur. It’s imperative that lawmakers and the governor’s office agree on a plan to add more money to the fund during the 2019-20 fiscal year that begins July 1.
The big question is how much the state will be able to afford.
According to a May 3 news release, Gov. Tom Wolf is committed to working with legislative leaders to strengthen budget reserves, and has expressed a willingness to discuss using all excess revenue to begin growing the Rainy Day Fund beyond its current almost-meaningless emergency capability.
The fact is that a state of Pennsylvania’s size should have an emergency fund “housing” in excess of $1 billion; even a financial cushion of $2 billion would not be excessive, as long as the commonwealth were able to meet its financial obligations without a tax increase or detrimental cuts to services.
Not setting aside more Rainy Day money during the coming fiscal year would smack of irresponsibility by Harrisburg, considering the strong incoming-revenue reports over most of the past 10 months.
General Fund collections from July 2018 through April — when incoming revenue was $464.7 million above estimate — totaled $828.5 million more than had been projected, with two months remaining in the current fiscal year.
That total could go up or down between now and June 30, but the state seems poised to have a surplus of $100 million to $200 million, based on estimates emanating from the state capital.
Whatever the positive total, if the current upbeat trend continues, rather than lawmakers and/or the governor wasting time bragging about how their efforts contributed to the current improved financial picture, they should use that energy instead to make sure that the surplus is allocated wisely, with at least some being deposited In the Rainy Day Fund.
In his May 3 news release, the governor, speaking in an upbeat tone, said, “After taking care of our mandatory expenses and investments in schools and other critical services, I believe we should even consider putting all surplus revenue in the Rainy Day Fund.”
Meanwhile, GOP leaders in the General Assembly have indicated they’re working toward passing a 2019-20 budget that spends less than the $34.1 billion that Wolf proposed in February.
Spending less should provide a bigger window for surplus money to be injected into the Rainy Day account.
The state’s 2018-19 budget contains a provision that at least 50 percent of any budget surplus for the year be deposited into the Rainy Day Fund.
As work continues on the 2019-20 spending plan, lawmakers and the governor should heed the message delivered by House Appropriations Committee Majority Chairman Stan Saylor on May 1: “We must be responsible and save.”
Management that ignores the possibility for “storms” is management on a risky path.