Auditor Galloway warns Missouri is not prepared for economic downturn

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. 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.

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.

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