Is Your State Ready for Recession? The Best- and Worst-Prepared for the Storm

Storm gathering over large city.
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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.

1. Wyoming

Maciej Bledowski / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: 129.5 percent

With nearly 130 percent of what it needs to weather a moderate recession, Wyoming leads the way in preparedness. Like the states that rank second and third on this list, Wyoming has a state economy that is heavily reliant on commodities, which are subject to volatile price swings. Moody’s notes that such states “are accustomed to budgeting under uncertain circumstances.”

2. Alaska

Pressmaster / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: 54.6 percent

Alaskans can rest easy knowing their state is in prime condition to withstand a recession — or two or three. The nation’s northernmost state has a substantial stash in its coffers, though it dropped from a first ranking in 2017 to second on this 2018 list.

3. West Virginia

LesPalenik / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: 15.8 percent

Coming in a distant third is West Virginia. Although its surplus is far less than those of Alaska and Wyoming, its reserves should still be enough to let the state move comfortably through the next recession.

4. Oregon

Mat Hayward / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: 9.4 percent

Oregon is among those states best positioned to endure a recession. Its reserves have grown substantially since the previous year’s study, bumping up its ranking from ninth in 2017 to fourth in 2018.

5. Hawaii

Seniors Hawaii
Goodluz / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: 7.7 percent

Sunny days are ahead for Hawaiians, even if the economy should sour. The state has a tidy surplus tucked away to help it ride out a moderate recession.

6. Delaware

Jon Bilous / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: 5.5 percent

Some East Coast states will be in trouble if a moderate recession hits, but not Delaware. The state has a 5.5 percent surplus in its reserves, up from 2.1 percent a year earlier.

7. Washington

Marina at Grays Harbor, Washington
Bill Perry / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: 5.2 percent

Washington state has 5.2 percent more in its coffers than it is expected to need to weather a moderate recession, up from a slim 1 percent surplus a year earlier.

8. Texas

Texas Capitol
clayton harrison / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: 5 percent

The state has a 5 percent surplus over the amount Moody’s says it would need in a moderate recession. That’s plenty, but down pretty dramatically from a year earlier when it stood at 10 percent.

9. Nebraska

Nebraska
Steve O’Donnell / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: 3.1 percent

While some of its neighbors aren’t positioned quite as well, Nebraska has done a good job of preparing for a recession — though its cushion has taken a bit of a drop in the past year. It has a 3.1 percent surplus in its reserves, compared with 9.6 percent in 2017.

10. North Carolina

Kazick / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: 3 percent

North Carolina’s 3 percent surplus is a significant improvement over last year, when it had a deficit of 0.3 percent of what it would need to weather a moderate recession.

11. South Dakota

Per Bengtsson / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: 2.9 percent

The Mount Rushmore State only has an extra 2.9 percent set aside, but Moody’s says the state should still be OK in a moderate recession.

12. Idaho

Boise, Idaho
Charles Knowles / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: 2.6 percent

Idaho’s rainy day fund is 2.6 percent more than it would need to sustain the state’s budget through a moderate recession — a nice improvement over 2017, when the state reserves were at a precarious 4.3 percent deficit.

13. Indiana

Charles T. Bennett / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: 2.3 percent

Right now, Indiana has 2.3 percent extra in its reserves — still ample for dealing with a moderate recession, but down from a 3.2 percent surplus a year earlier.

14. New Mexico

Hot air balloons in New Mexico
Tim Pleasant / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: 1.4 percent

New Mexico has improved its budgetary position measurably in the past year. The state now has the reserves to manage a moderate recession. A year earlier, it was among the states most poorly prepared for an economic shock, ranking 47th on the Moody’s list. In a column in the Albuquerque Journal, Gov. Susana Martinez describes the growth in state tax revenues that improved the state’s fiscal position.

15. Nevada

Two women hiking in Nevada.
Brocreative / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: 1.2 percent

Nevada is considered well-prepared for a moderate recession, with a slim surplus of 1.2 percent of what it would need to avoid fiscal shock in its reserves.

16. New York

New York viewed from Brooklyn Bridgge.
491615143 / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: 0.8 percent

New York is another state that had a slight deficit in the amount of its reserves available for handling recession in 2017, and now the Empire State enjoys a slight surplus.

17. Georgia

Savannah Georgia riverboat.
Sean Pavone / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: 0.5 percent

In Georgia, the state’s actual reserves are just above the estimate of what it would need to cover state costs in a moderate recession.

18. Alabama

Statue of Hank Williams in Montgomery, Alabama.
JNix / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: 0.1 percent

With distance from the last economic downturn, Alabama is among the states that have improved their fiscal position and is now set to weather another moderate recession — just barely!

19. South Carolina

Terrie L. Zeller / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: negative 0.1 percent

The Palmetto State is among states prepared to weather a moderate recession, despite having a slight deficit in the necessary amount of its reserves.

20. Tennessee

Street scene, Memphis, Tennessee.
f11photo / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: negative 0.2 percent

Tennessee has fallen behind a bit from a year earlier — with a 0.2 percent deficit in its reserves compared with a 3.3 percent surplus in 2017 — but it nonetheless was ranked among states that will be able to withstand a moderate recession.

21. Minnesota

LaNae Christenson / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: negative 0.2 percent

The Land of 10,000 Lakes ranks among the states Moody’s says is prepared to handle a moderate recession, despite having a modest deficit in the necessary amount of reserves.

22. Iowa

Iowa Capitol
Christopher Boswell / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: negative 0.5 percent

In America’s Heartland, Iowa is among the states Moody’s says could survive a moderate recession, despite having a slight deficit in the amount of reserves it would need.

23. California

Rodeo Drive Los Angeles, California
Michael Urmann / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: negative 0.6 percent

California, which has a slight deficit in the amount of its reserves needed to weather a moderate recession, is the final state that Moody’s considers well-prepared for such financial stress.

24. Maine

Darryl Brooks / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: negative 1.8 percent

States listed from here on are bordering on dangerous fiscal territory. These states aren’t in terrible shape, but they may have to tighten their belts with budget cuts or consider raising revenue through taxes and fees in order to weather a moderate recession.

Maine is in slightly better shape than it was a year earlier, however, when it had a deficit of 2.9 percent in the amount of necessary reserves.

25. Connecticut

City scene of Hartford, Connecticut
Sean Pavone / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: negative 2.5 percent

Connecticut has improved its position in the past year, from a deficit of 6.1 percent in 2017, but still falls below the level of reserves needed to avoid the fiscal shock of a moderate recession.

26. Maryland

City scene Annapolis, Maryland.
Sean Pavone / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: negative 2.5 percent

In Maryland, the deficit between its actual reserves and the amount needed is 2.5 percent. Moody’s Analytics used a model that assumes one to two years before the next recession is likely to hit, so there’s still time for Maryland and other states showing a deficit to boost their savings.

27. Colorado

vepar5 / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: negative 2.9 percent

Colorado’s economy is among the strongest in the country, and the state’s coffers have benefited as it expands. The state is still a bit shy of the amount of reserves it would need in a moderate recession, but it has climbed to 27th in this ranking from 45th in 2017.

28. Rhode Island

Rhode Island Capitol
wolffpower / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: negative 3.2 percent

The difference between the state’s actual reserves and necessary reserves shouldn’t spark panic, but it isn’t anything to be proud of either.

29. Utah

mariakraynova / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: negative 3.3 percent

Utah was right in the middle of the pack in 2017, but in 2018, with a 3.3 percent deficit between the reserves it has and needs to weather a recession, the state has fallen into the lower half.

30. Massachusetts

Boston, Massachusetts street scene.
Sunny Chanruangvanich / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: negative 3.5 percent

Massachusetts’ situation hasn’t changed much from last year, when it showed a deficit of 3.8 percent in the amount of reserves needed to cope with a moderate recession.

31. Vermont

Sean Pavone / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: negative 3.8 percent

In New England, Vermont is at the bottom of the barrel, reserve-wise anyway. The state is 3.8 percent short of what it would need to maintain budget demands in the event of a moderate downturn in the economy. That’s the biggest deficit in the Northeast region.

32. Ohio

Street scene in Cincinnati, Ohio
aceshot1 / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: negative 4 percent

Ohio’s rainy day fund was making progress, with its reserves last year at 1.4 percent below what would be needed to weather a moderate recession, but the state’s reserves fell to 4 percent below the necessary level in 2018.

33. Florida

Pelican on a dock in Key West, Florida.
Romrodphoto / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: negative 4.4 percent

The situation isn’t quite as sunny as it could be in Florida, where the state has a 4.4 percent deficit in the reserves it would need to prevent fiscal disruption during the next recession.

34. Arkansas

Capitol building in Little Rock, Arkansas.
W. Scott McGill / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession negative 5.2 percent

Arkansas is among the states pulling up the rear in terms of preparedness for an economic recession. States from here on have reserves that are more than 5 percent short of what each would need to withstand a moderate fiscal shock.

35. Michigan

Per Bengtsson / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: negative 5.3 percent

Michigan could weather a moderate recession now if it wants to cut its budget or raise revenues to make up the deficit in its reserves. If state lawmakers don’t want to go that route, they should consider finding some other way of putting more money into reserves, which are 5.3 percent below what it would need to prevent fiscal shock.

36. Mississippi

Jackson, Mississippi
Sean Pavone / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: negative 5.4 percent

Mississippi’s economy lags that of the nation, which may be why that state hasn’t put more of its revenues into its reserves. The state budget is losing ground — with a deficit of 5.4 percent in 2018 in the amount of reserves needed to deal with a moderate recession, compared with a deficit of 4.8 percent a year earlier.

37. New Hampshire

Edward Fielding / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: negative 5.7 percent

38. Kansas

vepar5 / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: negative 5.9 percent

The Midwest is home to a few states that could be in trouble should the economy sour. Kansas is one of those, with a 5.9 percent deficit between its actual reserves and what it would need to handle a moderate recession.

39. Wisconsin

Andrew Jalbert / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: negative 6.6 percent

Wisconsin has a 6.6 percent deficit between its actual reserves and what it would need to weather a recession.

40. Pennsylvania

vepar5 / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: negative 7.2 percent

Short of putting its expenses on a credit card, Pennsylvania would need to find ways to make up its 7.2 percent deficit between actual reserves and the amount the state would need when a moderate recession hits.

41. Illinois

Illinois Capitol
Donald Walker / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: negative 7.6 percent

42. Arizona

Yulia Mayorova / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: negative 7.9 percent

Arizona does have some money in its rainy day fund, but the current balance is 7.9 percent shy of what it would need to ride out a moderate recession without fiscal disruption.

43. Missouri

Jiri Flogel / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: negative 8 percent

The Show-Me State may want to show its rainy day fund a little more love. It currently sits at 8 percent below where it should be if the state hopes to successfully weather the economic impact of a moderate recession. That said, Missouri has improved a bit from a deficit of 8.4 percent a year earlier.

44. Virginia

Norfolk, Virginia at night.
Christian Hinkle / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: negative 8.5 percent

In Virginia, the state needs to add 8.5 percent more to its reserves if it wants to comfortably cover the economic disruption of a recession.

45. Kentucky

Louisville, Kentucky
f11photo / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: negative 8.7 percent

By Moody’s analysis, Kentucky dropped out of the midrange for preparedness (states with 1 to 5 percent deficits in needed reserves) in 2017 and into the danger zone of states more than 5 percent away from the reserves needed to survive a moderate recession.

46. Montana

tongcom photographer / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: negative 9.2 percent

As one of the 17 states highlighted this year by Moody’s as falling in the lowest range of preparedness for a moderate recession (those with reserve deficits of more than 5 percent), Montana needs to add 9.2 percent to its rainy day fund to have the reserves needed to avoid fiscal disruption.

47. New Jersey

Calvste / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: negative 10.7 percent

With a deficit of 10.7 percent in the amount of reserves it would need to avoid a fiscal shock, New Jersey may not have enough time to boost its reserves before the next recession hits.

48. North Dakota

Zack Frank / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: negative 15.1 percent

North Dakota should take a cue from its neighbor to the south and focus a little more on building up its rainy day fund. The state’s 15.1 percent deficit in the amount of reserves needed to survive a recession is an improvement over a year earlier — when North Dakota’s reserves deficit was 19.4 percent — but still nothing to boast about.

49. Oklahoma

RaksyBH / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: negative 15.3 percent

Oklahoma has the fifth-worst economy in the nation, according to a WalletHub study reported by Fox News. That may be why that state has such meager amounts of funds in its reserves. When the next recession hits, without more money in reserve, Oklahoma is going to have to find a way to make up a big chunk of its budget.

50. Louisiana

Alligator resting on a dock.
Terry Poche / Shutterstock.com

Actual reserves compared with reserves required to handle a moderate recession: negative 15.6 percent

No one wants to be in last place, but there you are, Louisiana. Even after improving from a 24 percent deficit last year to a 15.6 percent deficit in 2018, your prospects are still the worst. Some people blame your former governor, but it could just be that you have a lousy economy. Whatever the reason, the reality is your residents better hope a recession doesn’t come soon. You have a lot of catching up to do if you want to be ready for when times get tough again.

Where did your state rank in its recession readiness? Share your thoughts in comments below or on our Facebook page.

Kari Huus contributed to this report.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

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