New Jersey’s rainy day fund is running out — and experts say the state may not have enough set aside to cover even one full day of government operations if an emergency hits.
Rainy day funds (RDFs) are meant to act like a savings account for states. When tax revenue drops or unexpected costs arise, governments can dip into these reserves to avoid sudden cuts or tax hikes.
According to the Tax Policy Center, most states build these funds by setting aside leftover money at the end of each fiscal year. That includes New Jersey. However, that cushion is disappearing.
In April 2025, the fiscal year 2025-2026 budget review from the state’s Office of Legislative Services (OLS) predicted that the Surplus Revenue Fund — New Jersey’s official rainy day fund — would run flat in FY26 due to an “anticipated transfer in FY2025 of the FY2024 surplus”
Instead of relying on a formal reserve, New Jersey has been using what’s known as “undesignated fund balances.” This is leftover money spread across different state accounts.
While that may sound like a backup plan, those funds are also shrinking. The OLS estimates they will drop from about $7.8 billion in 2025 to $6.3 billion in 2026.
That means the state is spending down its savings at a time when financial pressures are growing.
Nationally, most states are in a stronger position. According to state data reported to the National Association of State Budget Officers, with $174 billion in combined savings, states could run government operations for a median of 47.8 days using rainy day funds alone in 2025.
While that number is down from the year before, it still shows many states have a solid financial cushion. New Jersey stands out for the opposite reason.
According to Pew, the state’s reserves wouldn’t be enough to keep things running for even a single day. The state with the second least amount of rainy day funds is Washington, which would be able to cover 12.8 days of operations.
Experts say this could become a problem if the economy slows or unexpected costs come up. Without savings to fall back on, the state may have to make quick decisions — like cutting services or raising taxes.
The issue isn’t just about one fund. It points to a broader challenge: New Jersey is spending money faster than it’s bringing it in. Although temporary boosts like federal pandemic aid once helped build up reserves, those funds are no longer available.
Pew researchers warn that rainy day funds are helpful, but they’re not a long-term fix for ongoing budget gaps. States need steady revenue to keep up with regular expenses.
For now, New Jersey still has some leftover funds to work with. But with those balances declining and no formal rainy day fund in place, the state has less room for error than many others.
