California Proposes to Harness Revenue Volatility to Rebuild Rainy-Day Funds

States withdraw money from budget stabilization funds primarily to counter unexpected drops in revenue. Pew research has found, however, that most states do not consider revenue fluctuations in determining how and when to deposit money into their reserve funds. According to “Managing Uncertainty,” Pew’s report on strategies to smooth revenue volatility, only a dozen states, including Massachusetts, Texas, Virginia, and Utah, link deposits directly to unexpected surges in volatile tax streams. California could join this list of states if Gov. Brown’s proposal passes.

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