State Auditor Nicole Galloway today called on elected officials in Jefferson City to take action to ensure Missourians are not affected in case of an economic downturn. Her audit of the state's Budget Reserve Fund found Missouri's rainy day funds are used throughout the year for day-to-day expenses, leaving little funding available in case of a recession.
"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. Lawmakers and the governor's administration have failed to responsibly plan for the future," Auditor Galloway said. "Families across the state have to guard their savings in case of a rainy day. Meanwhile, the state is using its savings account for day-to-day expenses."
The Budget Reserve Fund is the state's "rainy day fund," but is maintained at a level well below other states. The audit cited a 2018 stress test report from Moody's Analytics that ranked Missouri 43rd in the nation for preparedness for an economic downturn.
At the close of the 2018 fiscal year, the Budget Reserve Fund had a balance of $616 million. However, the governor's administration, like prior administrations, 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. This constant borrowing results in dangerously low balances, leaving no funds available if there was a recession.
There are constitutional limitations on how the Budget Reserve Fund can be used, which makes it an inadequate tool for stabilization purposes. Auditor Galloway called on lawmakers to create a true budget stabilization tool to ensure the state is prepared in case of an economic downturn. Without an effective tool to protect citizens, the state would be left with two options she said were unacceptable — cutting funding for critical services or raising taxes.
"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," Auditor 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 online here.