01/16/2020
State Auditor Nicole Galloway today said the proposal made by Gov. Mike Parson in his State of the State address to shore up Missouri's financial preparedness reflected a budget stabilization measure she called for in her past audits.
In his address on Wednesday, the Governor proposed setting aside $100 million to initiate a cash operating expense fund to give Missouri "greater flexibility and stronger finances." This appears to be separate from the Budget Reserve Fund, which is considered the state's "rainy day fund." Auditor Galloway has been critical of how the current and previous administrations have repeatedly borrowed from this fund to supplement cash flow throughout the year instead of only using the fund in times of true fiscal emergencies.
"For years, I have warned that Missouri is constantly dipping into the Budget Reserve Fund, leaving the state woefully unprepared for an economic downturn. I appreciate that Gov. Parson is heeding that warning," Auditor Galloway said. "As a CPA, my call for action to create a budget stabilization fund to ensure the state's fiscal health was both honest and responsible. The Governor's proposal to follow my suggestion is a step in the right direction."
In January 2018, Auditor Galloway first brought to light the issue of dwindling cash reserves in her audit on the Timeliness of Tax Refunds. That audit also recommended action to improve Missouri's financial preparedness. Again, the call was made to secure Missouri's financial position in a budget report released in February 2018. A copy of the audit on the Timeliness of Tax Refund Issuance is here.
In October 2019, Auditor Galloway issued further detail on the issue in a report on the Budget Reserve Fund. The audit found the fund was 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.
There are constitutional limitations on how the Budget Reserve Fund can be used, which makes it an inadequate tool for stabilization purposes. In October, 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 could face cuts to critical services. A copy of the Budget Reserve Fund audit is online here.
