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08 July 2011

Stouffer: Missouri’s Rainy Day Fund

Ever since a devastating tornado hit Joplin back in May, some questions have arisen over how to pay for the recovery efforts. The governor started to withhold money from the Fiscal Year 2012 budget, in part, to afford this. But, what about the “budget reserve,” a.k.a. the “rainy day” fund?

What we know now as the rainy day fund in Missouri was borne of Senate Joint Resolution 25 in 1999, by then-Missouri Sen. Larry Rohrbach. His proposal was placed on the ballot in 2000 and approved by 59 percent of the voters. This fund combined the “budget stabilization fund” of the early 1980s with the “cash operating reserve fund” that was created in 1986. The “rainy day fund” simply provides the ability to meet cash flow needs in times of emergencies or budget shortfalls.

The rainy day fund can be used to make cash operating transfers to meet the immediate cash requirements of the state without legislative authorization. These must be repaid by May 15, with interest, and no transfer can happen after May 15. The state routinely uses the fund for this purpose. For instance, in Fiscal Year 2011, $150 million was transferred to the general revenue fund in March 2011 and was paid back in April 2011.

The fund may also be used in the event of a disaster or to meet budget shortfalls within the current fiscal year. In both cases, the governor must request an emergency appropriation and the General Assembly must approve the bill by a two-thirds vote. The money must be repaid, along with interest, in equal payments during each of the three following fiscal years.

The fund has been used consistently to maintain cash flow, and has never been used to stabilize the budget. Before the rainy day fund existed, the only time money was appropriated was in 1993, in response to widespread flooding. A special session was called in the fall of 1993 and $16.1 million was appropriated by the General Assembly to finance reconstruction after the flood.

Whether or not the rainy day fund will be tapped into to help pay for the Joplin tornado or flooding along with Missouri River remains to be seen. We may have a better answer before lawmakers return to Jefferson City for the annual veto session in September.

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