Most Missouri families try to put away savings for a rainy day, such as when the furnace goes out, there’s an unexpected medical bill or a family member loses a job. Those emergency funds are meant for true emergencies.
The state of Missouri has its own rainy day fund. It was established in 2000 when Missourians approved creating the Budget Reserve Fund. Voters also saw to it that any money borrowed from the fund has to be paid back in a timely manner.
But as I found in my recent audit of the fund, Jefferson City hasn’t been fiscally disciplined in protecting our rainy day savings. For years, the state has been increasingly using the Budget Reserve Fund not for emergency needs, but to pay day-to-day expenses throughout the year. That is not fiscally conservative or responsible.
Borrowing against these savings just to pay the daily bills hasn’t been limited to tough economic times. In both fiscal years 2017 and 2019 — when Missouri’s economy has been stable — the state borrowed more than $500 million from the Budget Reserve Fund.
This constant borrowing means the fund is very often dangerously low, which dramatically raises the risk of money not being there after a devastating natural disaster or during an economic downturn. If Missouri experienced a recession similar to 2009’s, the state’s budget shortfall would be an estimated $1.2 billion — significantly more than what’s available in the Budget Reserve Fund.
We are woefully unprepared for an economic downturn. The leading financial firm Moody’s Analytics looked at how all 50 states were prepared to weather the next recession. Missouri was ranked the eighth worst, in no small part because our rainy day funds are maintained at such a low level.
Because we aren’t prepared for a financial crisis, the state would be left to cut funding for critical services such as education, public safety and infrastructure.
Missourians already share enough of the burden of funding government. They have seen that burden grow on a local level as property and sales taxes have risen. Communities are continually asked to fund a larger share of their schools, and families are paying more to send their kids to Missouri colleges.
Jefferson City needs to kick the habit of irresponsibly borrowing from the state’s emergency funds. It leaves Missouri without the ability to protect its residents in an economic downturn. This audit should be a warning sign to the governor and lawmakers before the problem becomes a crisis.
The state budget grows every year. Our finances become more vulnerable to economic bumps in the road — a road that takes us closer to the fiscal mistakes made by our neighbor to the west. I’m calling on the governor and the General Assembly to reverse this irresponsible course before we are on the bridge to Kansas.
The legislature should create a separate fund specifically to ensure the state has savings for the next recession. Missouri needs a budget that prioritizes a rainy day fund and takes a fiscally conservative approach, instead of government spending on new budget items.
We’ve had many rainy days in Missouri in the past 19 years: the devastating Joplin tornado, the lengthy Great Recession and repeated historic flooding throughout the state, to name a few. We know more rainy days are coming. Our state cannot remain the eighth-worst in the nation in financial preparedness.
As auditor, it’s clear to me we can’t keep doing the same things that have always been done. It is time to make sure Missourians are not burdened by the fiscal mistakes of the past.
Nicole Galloway is Missouri State Auditor.