20% cushion rule(redirected from Twenty-Percent Cushion Rule)
20% cushion rule
20% Cushion Rule
A rule of thumb for municipal bonds. Under the rule, the revenue a municipal bond raises should exceed the proposed budget of the project the bond intends to fund by at least 20%. This allows the bond to account for unforeseen expenses. Following a cushion rule is especially important because municipal bonds are ultimately financed by taxpayer money.