Experts from The Pew Charitable Trusts sent a memo to Jason Carini, treasurer of Rogers County, Oklahoma, outlining how rainy day funds can help the state’s local governments manage revenue volatility and recover from economic shocks, including natural disasters or recessions.
The memo explains the value in states allowing their local governments to establish rainy day funds and specifies how these funds should be designed. It also advises lawmakers on several best practices based on Pew research. The memo recommends that officials routinely study how revenues react to the ups and downs of the business cycle in order to inform the savings target, tie rainy day fund deposits to extraordinary or unexpected revenue, and base the withdrawal rules on revenue or economic volatility.