||The annual water storage changes at 12 watersheds in Illinois are estimated based on the long-term soil moisture and groundwater level observations during 1981–2003. Storage change is usually ignored in mean annual and interannual water balance calculations. However, the interannual variability of storage change can be an important component in annual water balance during dry or wet years. Annual precipitation anomaly is partitioned into annual runoff anomaly, annual evaporation anomaly, and annual storage change. The estimated annual storage change ratios vary from −60% to 40% at the study watersheds. The interannual variability of evaporation is not strongly correlated with the interannual variability of precipitation, but is correlated with the interannual variations of effective precipitation. As a response to the interannual variability of precipitation, the interannual variation of evaporation is smaller than those of runoff and storage change. The effect of annual water storage change increases the correlation coefficients between annual evaporation ratio and climate dryness index. Therefore, interannual water storage changes need to be included in the estimation of evaporation and total water supply in the Budyko framework. Effective precipitation can be used as a substitute for precipitation when computing evaporation ratio and climate dryness index.