State Budget Practice Report Cards and Budget Resource Guide
States that depend on revenues from natural resource production generally maintain healthy rainy day funds to help compensate for their economies’ vulnerability to volatile commodity prices. Yet until a few years ago, Montana, a major producer of coal, oil, and natural gas, did not have a formal rainy day fund and instead relied on general fund balances in its place. That changed in 2018, when the state began depositing money into the newly created Budget Stabilization Reserve Fund. Montana’s mark in reserve funds reflects this shift, which helped the state earn a B average in the category for fiscal 2017 through 2019, up from C for the previous three-year period.
Montana’s new rainy day fund policies adhere closely to best practices cited in the recent Volcker Alliance working paper, Rainy Day Fund Strategies: A Call to Action. Like twenty other states, it ties rainy day funding to historical revenue volatility, requiring that half of revenues above its annual estimate, plus $15 million, go into the stabilization reserve. In 2021, the volatility formula will change; the fund will receive half of any revenues in excess of the average for the past six years.
In contrast to its improving reserve funds grade, Montana averaged only a D in budget forecasting—the second-lowest mark possible. The state does not provide multiyear revenue or expenditure forecasts, and it lacks a consensus revenue estimating process. It did relatively well in avoiding one-time revenue measures, however, posting a B average in budget maneuvers.
To emphasize the need for clear and comprehensible budgets to inform citizens, promote responsible policymaking, and improve fiscal stability, the Volcker Alliance in 2016 began a study of budgetary and financial reporting practices of all fifty states. The Volcker Alliance’s mission is to improve the effectiveness of the administration of government at all levels. Making state budgeting more transparent and accountable is an important part of that goal.
The report cards found here contain grades of the state's budgetary practices during the fiscal years of 2017 through 2019. Each state received marks in five critical categories, based on their adherence to best practices in several key budgeting indicators. The five categories covered methods used to achieve budgetary balance as well as how budgets and other financial information are disclosed to the public.
States received grades of A to D-minus (there are no “failed states”) for their procedures in estimating revenues and expenditures; their use of one-time actions to balance budgets; how they oversee and use rainy day funds and other fiscal reserves; the adequacy of their funding of public worker retirement and other postemployment benefits; and the quality of transparency of budget and related financial information. The grades are based on research conducted by public finance and budgeting professors and students at eight US schools of public administration or policy. The universities’ research efforts were augmented by Volcker Alliance staff, data consultants at Municipal Market Analytics, and special project consultants Katherine Barrett and Richard Greene.
State Budget Sources
State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses is a resource published by the Volcker Alliance designed to help public officials, policy advocates, journalists, academics, and concerned citizens fully understand the critical fiscal decisions that governors and legislators must make. The guide includes the links below to budgets for this state as well as legislative analyses of budget bills and treasurers’ or comptrollers’ monthly state cash-flow statements; capital spending plans; reports on public-worker pension funding and returns; and reports by local and national fiscal research organizations, bond rating firms, and associations of state fiscal and finance officials.