Created nearly two decades ago, the fund has over $3 billion to combat budget crises.

By Khushboo Rathore/Oregon Journalism Project

Oregon’s rainy day fund grew by $200 million in the most recent fiscal year, not quite fast enough to outpace the growth in state spending.

One of the ways budget analysts measure financial strength is to track the daily cost of running a government. They can then assess the ability of a government, like Oregon’s, to weather economic hard times by counting how many days of operating expenses its savings, or rainy day fund, covers.

Because Oregon’s operating expenses grew faster than its savings last year, the state effectively lost one-third of a day of funding for emergencies. If needed, the state could operate for 62.4 days on its $3.14 billion rainy fund.

That’s 14.5 days more than the average for all 50 states.

Rainy days funds are reserve balances that states set aside to get through difficult financial years and still provide essential services.

Sheila Martin, an economics researcher at Portland State University, says rainy day funds are an important tool to stabilize budgets when conditions worsen unexpectedly, but she warns: “They shouldn’t be used to address structural budget deficits.”

Such deficits are foreseeable when revenues fall or expenses rise to cause budget shortfalls. In Oregon, Martin cites the example of gas tax revenues, which have failed to keep pace with the Oregon Department of Transportation’s proposed expenditures largely because more Oregonians drive electric or more fuel-efficient cars. Using the rainy day fund to fill the gap wouldn’t solve the real problem—that the gas tax is “no longer a reliable revenue source,” Martin said.

The Tax Policy Institute urges states to maintain a 60-day rainy day fund. Not only does Oregon do that, but state law makes it more difficult for Oregon to tap its rainy day fund than other states. One of three conditions must first be met: Expected revenue for the state’s biennial budget must fall by at least 3%; unemployment must increase two quarters in a row; or a quarterly revenue forecast must show a 2% decline in expected revenue. Even then, a three-fifths majority of both houses of the Oregon Legislature must approve the emergency spending.

The last time Oregon tapped its rainy day fund was in the 2019–2021 budget cycle, when the Legislature voted to withdraw $400 million during the COVID-19 pandemic to give to schools.

Like many states, Oregon faces cuts in federal funding, but it’s unclear if any of the three conditions will be triggered by the cuts.

Republicans created tax cuts for the wealthy by trimming Medicaid and the Supplemental Nutrition Assistance Program (i.e., food stamps), and possible cuts to the Federal Emergency Management Agency budget would force states like Oregon to shoulder more of the burden in the event of a natural disaster.

Oregon will be particularly hard-pressed. The state could be required to pay more than $185 million in SNAP benefits starting in October 2029 due to a high error rate in how the state has distributed benefits. Oregon also has one of the nation’s highest proportion of low-income residents relying on Medicaid.

The federal government is “no longer funding a significant share of the expenses of low-income people on health insurance in Oregon, and the state is trying to figure out how to make up for that,” Martin said.

According to research by the Pew Charitable Trusts, 34 states have seen the number of days they could run solely on rainy day funding shrink over the past two years—anywhere from less than a day to 33.8 days.

Oregon’s loss of one-third of a day was its first decline since 2022.

This story is from the Oregon Journalism Project and is used with permission