STATE'S RESERVES: NOT MUCH CUSHION

When John Ashcroft, now a U.S. senator, was governor of Missouri, he urged the creation of a special reserve fund that could be used if the state ever found itself in a financial emergency, particularly one caused by some unforseen calamity. As a result, the Legislature passed legislation in 1985 creating the Budget Stabilization Account, popularly known as the Rainy Day Fund.

The Rainy Day Fund is one of two reserve funds maintained by the state. The other is the Cash Operating Reserve, which can only be used to make up any shortfalls in anticipated state revenue. This fund would allow state government to spend at budgeted levels, regardless of revenue, as long as the fund lasted.

Missouri, as with most other states, constitutionally bars deficit spending. The Legislature appropriates what state forecasters say the state will take in. Not more. And, unfortunately, not less.

The Rainy Day Fund, however, was envisioned as being the kind of fund a family would set aside in a special account, drawing interest until it was needed for an emergency: car repairs, unexpected hospital expenses and the like. Since its creation, the Rainy Day Fund has been dipped into twice, once in 1992 when a federal court ruled that Missouri must refund state income taxes that had been paid by retired federal workers on their federal pensions. That cost $17.2 million.

Another use of the Rainy Day Fund occurred in 1993 when the Mississippi and Missouri rivers flooded large areas of the state. Some $16 million was taken from the fund to help with rescue and rebuilding efforts.

Today, The Cash Operating Reserve has $257.5 million in it. And the Rainy Day Fund has $126.7 million. Neither fund received any additional deposits during the just-ended legislative session. The only additions to the funds are in the form of interest earnings.

Nearly $400 million might sound like a lot of money. And consider that, when the Rainy Day Fund was created in 1985, the total cost of state government was but a fraction of the budget for the fiscal year that begins July 1, a whopping $15.9 billion. Moreover, the strong economy today is far different than in 1985. State taxes are producing more revenue than permitted by constitutional limits set by the Hancock Amendment.

In fact, Missouri's government will cost $43.6 million a day in the coming fiscal year. At that rate, both the Cash Operating Reserve and the Rainy Day Fund combined would only last about 10 days in the event of a disaster or emergency that required the state to rely on those funds.

It is strange that, in these boom times, little thought has been given to socking away a substantial amount that would provide a real cushion for state government if the need ever arose. With state coffers overflowing, the focus has been on more spending rather than reduced taxation or a prudent savings account that would come in handy if, say, the capitol burned down.

This being an election year, most officials were hell bent on providing as many goodies as needed to assure good re-election odds in November. Come next January, however, it might be a good thing to take a look at the state's reserve funds and make them more realistic.