When extreme weather disrupts communities, small businesses often wind up being the first responders and first casualties. Investing in small business resilience can translate into fewer closures, less unemployment, faster recovery, and stronger local spending after disasters strike.
Two trends are colliding in state finance offices: Emergency, or “rainy day,” funds are shrinking at the exact moment climate-related revenue losses are mounting.
States are seeing their emergency reserves shrink for the first time since the Great Recession. The path forward is a new, two-pronged pro-growth, pro-resilience model that expands the state’s economic base while simultaneously modernizing the financial tools used to protect it.
Two trends are colliding in state finance offices: Emergency, or “rainy day,” funds are shrinking at the exact moment climate-related revenue losses are mounting.
Two trends are colliding in state finance offices: Emergency, or “rainy day,” funds are shrinking at the exact moment climate-related revenue losses are mounting. The Pew Charitable Trusts report that the median state’s rainy day reserves—measured by how many days a government can run on savings—has fallen for the first time since the Great Recession, from 53.2 days in 2024 to 46.9 days this year.
This decline signals the coming of a perfect storm, the fiscal squeeze exacerbated by the federal government's withdrawal as a reliable disaster backstop. Increasingly, states are left alone to shoulder a problem of double exposure: financial strain on one side, and the growing expense of climate risk on the other.
Wildfires wipe out tourism revenue. Rising tides threaten entire municipal balance sheets. Take Florida, for example: One recent study published in 2023 found that in 2018, sea level rise had endangered $619 billion in assessed property values, which contributed $2.36 billion in property taxes to the state. Meanwhile, according to Pew, Florida's current rainy day fund can cover just 28 days of spending—barely a month to absorb the compounding shocks that erode the very revenue streams governments depend on.
In this new reality, decisions to cut or delay capital improvements or development services—like planning and public works—represent a cycle of false economies, limiting future growth while putting existing assets at even greater risk. The only viable path forward is a two-pronged model that treats growth and resilience as inseparable.
The first prong is economic: prioritizing resilient development that creates durable, disaster-proof revenue streams. States and localities already control the key to this transformation: underutilized public land like parking lots and surplus parcels that could be redeveloped into housing and mixed-use projects. This new construction must meet a resilience-first standard, hardened against extreme weather to ensure these assets don’t turn from revenue generators into future liabilities.
The second prong is fiscal: modernizing the financial architecture that protects growth. This means moving beyond static rainy day funds to dynamic "RiskReserves." This new class of financial tool integrates physical risk into fiscal management, allowing finance officers to understand how, where, and when funds are most exposed. Building on local assessments of on-the-ground exposure, modernization could look like embedding climate-adjusted stress tests into official revenue projections, creating new funding mechanisms, and opening the door to new public-private partnerships.
We need both prongs. Growth without resilience is reckless gambling with the public purse. But resilience without growth amounts to managing a slower decline, as the community slowly drains its reserves to protect a stagnant tax base. The path forward requires weaving these priorities together from the start, and that demands a fundamental shift in governance.
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17,000 homes
Even if we meet emissions-reduction targets put forth by the Paris Agreement, 17,000 homes in Florida will be at risk from flooding by 2050.
Source: ClimateCentral
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The Epicenter helps decision makers understand climate risks and discover viable resilience solutions. The Epicenter is an affiliated publication of The Resiliency Company, a 501(c)3 nonprofit dedicated to inspiring and empowering humanity to adapt to the accelerating challenges of the next 100+ years.
States are seeing their emergency reserves shrink for the first time since the Great Recession. The path forward is a new, two-pronged pro-growth, pro-resilience model that expands the state’s economic base while simultaneously modernizing the financial tools used to protect it.
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