JEFFERSON CITY, Mo. — Missouri’s state auditor, who is making a 2020 gubernatorial bid, has two recommendations to bring the rainy day fund up to snuff: increase the maximums and create a second fund.
An audit of the state’s Budget Reserve Fund found the balance would not sustain an economic downturn, said Nicole Galloway, whose office released the report on Tuesday.
“As a CPA who has examined the financial stability of businesses and governments, I know when warnings need to be sounded. This audit reveals that Missouri is woefully unprepared in case of an economic downtown,” Galloway said.
At the close of the 2018 fiscal year, the Budget Reserve Fund had a balance of $616 million. Like prior administrations, the governor has relied on the fund to supplement cash flow throughout the year. Since 2011, more than $360 million has been borrowed from the fund every fiscal year — with more than $500 million borrowed in both 2017 and 2019.
Galloway blasted the constant borrowing as resulting in “dangerously low balances, leaving no funds available if there was a recession.” She pointed to a 2018 stress test report from Moody’s Analytics that ranked Missouri No. 43 in the nation for preparedness for an economic downturn.
The Budget Reserve Fund was created in 2000 by a voter-approved constitutional amendment. It was preceded by two different funds, the Budget Stabilization Fund and the Cash Operating Reserve Fund, which were created in response to the recession of the early 1980s.
The constitution limits the amount of the fund to 7.5 percent of the general revenue. Galloway called on lawmakers to increase the balance to 10 percent — which is allowed under the constitutional amendment if done through the legislature.
Galloway also called on the creation of the second fund which would be used as a true “budget stabilization fund.”
“The General Assembly adds more to the state’s budget each year. At the same time, our state’s finances become more vulnerable to economic bumps in the road,” Galloway said. “We can’t keep doing the same thing that has always been done. Now is the time to act to make sure Missourians are not burdened by the fiscal mistakes of the past.”
A complete copy of the report is can be found here.