Does Oregon Need a Rainy Day Fund? Like a Fish Needs a Bicycle

17 Pages Posted: 16 Dec 2004

See all articles by Fred Thompson

Fred Thompson

Willamette University - Atkinson Graduate School of Management

Bruce Gates

Willamette University - Atkinson Graduate School of Management

Jessica Brown

National Geographic Society

Jason Page

University of North Carolina at Chapel Hill

Ryuzaburo Yoshida

SECOM Co., Ltd. - Business Development Division

Multiple version iconThere are 2 versions of this paper

Date Written: December 7, 2004

Abstract

Oregon has one of the biggest cyclical budget problems in the country, if not the biggest. Without a rainy day fund, Oregon's state government would have a budget shortfall ten years out of twenty; two of which would be equal to or greater than twenty percent of annual spending. Oregon could substantially reduce the frequency of unredressed budget shortfalls and their magnitude with a sufficiently large cash balance. The problem is that Oregon cannot afford a rainy day fund big enough to make a significant difference. It seems, in fact, that any state that really needs a rainy day fund probably cannot afford one and that any state that can afford a rainy day fund probably does not need one. Analyses that focus on averages or on individual states with stable economies and income inelastic tax bases conceal this reality. States with very volatile revenue flows should consider counter cyclical borrowing as an alternative to building large cash balances.

Keywords: Rainy Day Funds, Oregon, cash balances, inventory model

JEL Classification: H71, H72, H74

Suggested Citation

Thompson, Fred and Gates, Bruce and Brown, Jessica and Page, Jason and Yoshida, Ryuzaburo, Does Oregon Need a Rainy Day Fund? Like a Fish Needs a Bicycle (December 7, 2004). Available at SSRN: https://ssrn.com/abstract=631944 or http://dx.doi.org/10.2139/ssrn.631944

Fred Thompson (Contact Author)

Willamette University - Atkinson Graduate School of Management ( email )

900 State Street
Salem, OR 97301
United States
503-370-6228 (Phone)
503-370-3011 (Fax)

Bruce Gates

Willamette University - Atkinson Graduate School of Management ( email )

900 State Street
Salem, OR 97301
United States
503-370-6440 (Phone)
503-370-3011 (Fax)

Jessica Brown

National Geographic Society

No Address Available

Jason Page

University of North Carolina at Chapel Hill ( email )

102 Ridge Road
Chapel Hill, NC NC 27514
United States

Ryuzaburo Yoshida

SECOM Co., Ltd. - Business Development Division ( email )

Medical Department
Harajuku
Japan
81-3-5775-8030 x5417 (Phone)
81-3-5775-8030 (Fax)

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