PA's ‘Rainy Day Fund’ Hits Record $7.04 Billion

Pennsylvania’s so-called “Rainy Day Fund” has a record-high balance of $7.04 billion, according to the Pennsylvania Treasury.

Created to mitigate the need for tax increases or cuts in discretionary programs during economic downturns, the fund now can cover state General Fund expenses for 53.6 days. The duration surpasses the national median of 46 days, treasury officials said.

Pennsylvania Treasurer Stacy Garrity, a Republican, credited a new investment strategy in October 2023 that has generated $400 million in earnings, $50 million more than expected.

“When I took office, the Rainy Day Fund was essentially dry – there was only enough money to run the state for about 48 hours. I’ve been a strong advocate for building our reserves, and thanks to a number of wise decisions by the General Assembly and the Governor, we now have enough set aside to run the state for more than 53 days, which is above the national median,” Garrity said.

The new investment strategy allocates 20 percent of the fund to the state’s Consolidated Cash Pool, with the balance invested in U.S. Treasury and federal agency securities, investment-grade corporate bonds, and other short-term, fixed-income assets with maturities under three years, according to the treasury.

Contributions have been made to the fund over the past four years, including $2.6 billion in September 2021, $2.1 billion in September 2022, $900 million in November 2023, and most recently, $737 million approved under the bipartisan 2024-2025 state budget.

The budget with the large chunk of rainy day cash was approved by both Democratic and Republican members of the legislature and signed into law by Democratic Governor Josh Shapiro.

The growth of the fund has positively impacted the state’s credit ratings, with agencies such as Moody’s, S&P, and Fitch taking note, officials said.

Shapiro’s office estimated last year that the improved ratings could save the state between $6 million and $12 million in interest on 2023 bonds.

However, the fund’s growth has not been without controversy.

During the 2024-2025 budget planning, some Democrats argued for tapping into the reserve to increase spending on education and other programs.

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