We’d like to think we can avoid another recession in this country, but we can’t. Economic expansion followed by recession is simply the way things work in a capitalist society.
Since we know it’s not a question of if, but rather when, a recession hits, we all need to be prepared. For families, that means having an adequate emergency fund. For states, it requires putting enough into reserves to ride out a downturn.
Moody’s Analytics looked at state reserves to see how well they would weather a moderate recession. The group compared actual reserves, as a percentage of state revenues, with the necessary reserves a state would require to comfortably withstand an economic downturn. (How much a given state needs to hold in reserve varies depending on particular economy and tax structure.)
The analysis, which updates findings from a 2017 study, shows some states are making progress. There are now 23 states with reserves sufficient to handle a recessionary shock, compared with 16 a year earlier. Meanwhile, 10 states have most of the funds they would need to squeak by (compared with 17 earlier), and the report predicts 17 states are going to be in serious trouble in a recession, based on their current reserves. Says Moody’s:
Some among those least prepared would need to either raise taxes or cut spending by upward of 10% of their entire budget if a recession were to impact their state this fiscal year.
Here’s a ranking of all 50 states — starting with those best prepared for recession according the reserves that they hold and ending with states that need to start saving ASAP. Find out where your state stands.