Slower US State Revenue Puts Spotlight on Record Rainy Day Funds

Record reserve funds built by US states in the past two years are likely to be needed as tax receipts slow, federal pandemic aid dwindles and the economy heads toward a recession.

California already is projecting a massive deficit for next year and Illinois posted a “stunning” $1.84 billion drop in April receipts from a year ago. The National Association of State Budget Officers says most states are planning for softer revenue growth or slight declines for fiscal 2023 and 2024, after double-digit percentage increases for two consecutive years.

Overall states’ tax revenue growth is poised to decrease to between ...