Gov. Doug Ducey’s desire to see Arizona’s rainy day fund increased is one step closer reality, as Sen. J.D. Mesnard, R-Chandler, has introduced legislation to increase the cap on how much the state can save.
Senate Bill 1091 would increase the amount the state can save in its budget stabilization fund from seven percent of state revenues to 10 percent. The fund is essentially the state’s savings account, where it can set aside money to be used if there is an economic downturn or natural disaster.
Mesnard has run this legislation in the past, but it died on the Senate floor. This time, he said he’s “reasonably confident” it will make it through the process.
“I extracted from (Ducey’s state of the state) speech that he’d be on board with something like this,” Mesnard said when asked if Ducey had asked him to sponsor the bill.
During the first two years of the Great Recession, many states depleted those funds and have been slowly building them back up. Arizona is one of the 19 that saw their fund depleted in that time.
Currently, Arizona’s rainy day fund has about $461 million, or about 4.8 percent of state revenue. State law currently caps the fund at seven percent.
Mesnard’s bill comes on the heels of a presentation by the Pew Charitable Trusts to the Senate Appropriations Committee Tuesday that outlined how long Arizona takes to recover from economic downturns and how much the state should have saved in order to better cope with future recessions.
Their research found that Arizona, on average, takes six years to recover from any form of economic downturn.
Additionally, they found that Arizona should have about 7 percent of its revenues in savings to sustain a moderate downturn. In a more severe scenario, much like the one the country faced in 2008, the state would need a fund of roughly 16 percent to cover costs during the six year recovery period.
In that same scenario, roughly 9 percent, or $1 billion, would be needed to cover the first two years.
Allowing the state to save more will also have another impact, Mesnard said: increasing the state’s credit rating.
The bill has been referred to the Senate Appropriations Committee, but a hearing has not yet been scheduled.