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Many U.S. states have been slow to improve their finances nine years into the economic expansion. That raises a risk they won’t be prepared when another downturn hits, making them susceptible to big spending cuts that make that next recession worse, according to a Wall Street Journal analysis. State governments have been grappling with tepid revenue growth and heavy pension and Medicaid costs. In many places that has resulted in smaller reserves. Measured as a share of spending, 21 states had smaller rainy day funds in 2017 than they did in 2008, according to data from the National Association of State Budget Officers compiled by the Tax Policy Center. Rainy day funds help states preserve spending levels when their revenues plunge. Those reserves are especially important because, unlike the federal government, states don’t run budget deficits in downturns. Most states rely primarily on income and sales taxes to fund their budgets. That makes them particularly vulnerable during recessions, when layoffs result in lost incomes and scaled-back purchases. At the same time, recessions put pressure on state spending as demand for government services, such as unemployment insurance and Medicaid, soars. In previous recessions, the federal government stepped in with spending to keep states afloat. That may be harder to do next time because federal debt is rising rapidly. “There are levers that all the states could think about in terms of preparing for the next economic downturn,” said Federal Reserve Bank of Boston President Eric Rosengren. “It doesn’t seem like there is that much movement in that direction right now in many states.”

U.S. companies are funneling extra money into their pension funds to take advantage of temporary tax savings, moves that are helping suppress yields on long-term Treasurys, the Wall Street Journal reported. S&P 500 companies are contributing to pension plans this year at a pace expected to nearly match 2017’s level, which at $63 billion was the most since 2003, according to Goldman Sachs Asset Management. Last year’s contributions were spurred in part by companies anticipating changes in the U.S. tax-code overhaul. That and continued contributions this year have been a boon for the Treasury market because pension funds tend to invest in long-dated bonds to match their long-term liabilities. The yield on the 30-year bond has been falling recently, closing at 2.959 percent on Tuesday, down from a recent peak of 3.245 percent in mid-May. Analysts are pinning the drop in yields — which happens as prices rise — partly on demand from pension funds. Long-term rates have remained low and U.S. inflation has picked up this year.

Companies with underfunded pensions have a rare opportunity to score a tax break in the coming months, the Wall Street Journal reported. Pension contributions made through mid-September can be deducted from income on tax returns being filed for 2017 — when the U.S. corporate tax rate was still 35 percent. That means a company that contributes $100 million to its pension plan now can save $35 million in taxes, while a company contributing the same amount after the deadline would save just $21 million, based on the new 21 percent corporate tax rate. With the deadline less than three months away, corporations are preparing to top off their pension plans to take advantage of the beneficial tax treatment. This one-time incentive is helping corporations close a pension funding gap that topped $680 billion for S&P 1500 companies after the financial crisis, according to consulting firm Mercer.