connecticut budget

Q&A: State Treasurer Shawn Wooden Discusses Connecticut's Rainy Day Fund

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Connecticut currently has $3.1 billion in what’s known as the rainy day fund.

After more than a year and a half in a pandemic, a lot of people might be looking at their personal finances and wishing they were in better shape. But the financial picture for the state of Connecticut is actually better than it's been in years.

The state has a lot of money in what's known as the rainy day fund - $3.1 billion.

That's enough money to fund the government for nearly 70 days, and while that may not seem like a long time, Connecticut actually has one of the largest rainy day funds in the country.

Research from Pew Charitable Trusts shows that the state had the largest increase in savings, with a $940 million boost from 2019 to 2020.

State Treasurer Shawn Wooden sat down with NBC Connecticut's Dan Corcoran to talk about what this means.

Dan: "We are in a global pandemic and yet from this standpoint, Connecticut seems to be doing pretty well. We've got a lot of money there in that rainy day fund. So how did we actually get to that point? Where did this money all come from?"

Wooden: "This money came from the taxpayers. And this is based on recent years, smart fiscal policies, a different direction and leadership has been taking to prioritize fiscal discipline, a 2017 bipartisan budget created the volatility cap, we call it or adjustment, where additional funds in terms of the most volatile tax receipts go into the budget reserve fund or the rainy day fund."

Dan: "Now, there's probably a lot of people out there that don't really understand the basics of what a rainy day fund is, they might hear that these numbers are, are getting bigger. And they might be wondering, so why doesn't this translate to lower taxes, but this isn't just extra cash we have lying around to use for anything right?"

Wooden: "In the event of prices and emergency to actually have had funds available to make sure that we can provide for critical services, and the 2008 great financial recession, we went into that crisis with half as much in our rainy day fund. And we depleted it completely. By contrast, going into the pandemic, we had twice as much. And we were able to grow it in the midst of a pandemic, have not depleted it, and did not spend one day of this pandemic worried about whether or not we could fund critical basic services. And that is very different from what treasures struggled with others across the country."

Dan: "Now lastly, even though this doesn't directly translate to more money in the pockets of Connecticut residents specifically should they feel good knowing that we have this amount of money in the reserves right now?"

Wooden: "They should absolutely feel good. You know, I'll tell you as treasurer during a pandemic, early days, every week, I'm on the phone with treasurers across the country. And there are some states that didn't know if they could actually meet payroll. We never had that issue for one day of this pandemic. And that is critically important that we were able to do that. And it's actually quite remarkable that we were able to grow that fund, as well as provide for all of our critical services during this period of time, as well as making historic $1.6 billion additional contributions for pension liabilities.