Rainy Day Fund is Not an Option
Our Superintendent of Public Works is fond of saying at our annual Town Meetings, “Hope is not a plan.”
The Rainy Day Fund (RDF) interest that some are pinning their hopes on to solve the Town’s budget deficit will not be available to the Town. That is not my opinion — it is a fact. Consider these points;
1) While $8B is a lot of money, consider that amounts to about 12% of the State’s entire operating budget. Now consider that Fairhaven’s own Financial Policy states, “The Town will strive to maintain overall general fund reserves (free cash and stabilization funds combined) at the level of 10-15% of the annual operating budget.”
The State’s $8B reserves are actually in line with what the Town thinks is fiscally responsible. Shouldn’t we want the State to be just as fiscally conservative as we strive for in Fairhaven?
2) In the Commonwealth Annual Comprehensive Financial Report (link below) the Comptroller states, “Historically, balances in the Stabilization (Rainy Day) Fund have been used almost exclusively during recessionary periods to offset budget shortfalls (after other budget measures have been taken). “
With COVID-19 not all that far in the rear view mirror, with significant policy changes at the national level that could result in lower federal funding coming to the commonwealth, and with some economists talking about the potential of recession, do we really think the State would choose this time to make major changes to the Stabilization Fund?
3) It has been stated that the interest alone on the State’s RDF is over $400M and we should turn to the state to ask for those funds to help solve our budget deficit. Consider the fact that the State is already investing that interest. For example, last year, the state utilized the $420M in interest on the RDF to a Federal Match program and for debt reduction for a very solid return on investment.
4) Most importantly, we should understand that the RDF is not going to solve the Town’s problem any time soon because on November 15th of 2023, the Governor sent out a Press release reading, “To further increase Massachusetts’ ability to secure federal funding, Governor Healey filed legislation in October to make available an additional $800 million in state funds over the next three years to pursue federal grants. The legislation leverages the interest earnings on the state’s Stabilization Fund, which currently stands at an all-time high of roughly $8 billion, and adds to the roughly $2 billion in state matching funds that have already been identified from other funding sources, including through the FY24-FY28 Capital Investment Plan, the FY24 budget, and other appropriations”.
The interest referenced has already been committed to match Federal Grants for at least the next three years thus making a request to the State for RDF monies a moot point.
Sources: https://tinyurl.com/5h47f72k; Page 83 of https://www.macomptroller.org/wp-content/uploads/acfr_fy-2023.pdf;
https://www.macomptroller.org/commonwealth-stabilization-fund/;
https://www.macomptroller.org/wp-content/uploads/acfr_fy-2023.pdf;
https://fairhaven-ma.gov/wp-content/uploads/2024/04/2024-09-09-Select-Board-Meeting-Minutes.pdf
Bob Espindola, Fairhaven
Mr. Espindola served on the Fairhaven Select Board for 12 years.
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