Missouri’s budget basics

According to the National Association of State Budget Officers (NASBO), Missouri’s total expenditures in fiscal year (FY) 2019 were $26.4 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2019 were $2.1 trillion, ranging from $4.5 billion in South Dakota to $311.3 billion in California.

Each state allocates spending and taxes differently among different levels of governments, and local governments often administer programs with state funds, so combined state and local government data show a more complete picture of individual benefits and contributions when comparing states.

Per the US Census Bureau, Missouri’s combined state and local direct general expenditures were $47.2 billion in FY 2017 (the most recent year census data were available), or $7,721 per capita. (Census data exclude “business-like” activities such as utilities and transfers between state and local governments.) National per capita direct general expenditures were $9,446.

Missouri’s largest spending areas per capita were elementary and secondary education ($1,708) and public welfare ($1,541). The Census Bureau includes most Medicaid spending in public welfare but also allocates some of it to public hospitals. Per capita spending is useful for state comparisons but is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, administrative procedures, or residents’ choices.

Missouri’s combined state and local general revenues were $47.6 billion in FY 2017, or $7,792 per capita. National per capita general revenues were $9,592. Missouri uses all major state and local taxes. After federal transfers, Missouri’s largest sources of per capita revenue were charges ($1,361), such as state university tuition and highway tolls, and individual income taxes ($1,073).

Missouri’s politics

Governor Mike Parson, a Republican, was elected lieutenant governor in 2016 with 53 percent of the vote. He became governor in 2018 after then Governor Eric Greitens resigned amid scandal. The next gubernatorial election is in 2020.

Republicans control both the House of Representatives (113 Republicans to 43 Democrats) and Senate (24 Republicans to 10 Democrats), with veto-proof majorities in both houses. Control of the governor’s mansion and each house of the legislature gives Republicans a trifecta in Missouri. All Missouri House seats are on the ballot in 2020 because representatives serve two-year terms. Senators serve four-year terms; roughly half the senatorial seats are on the ballot in 2020, and the other half will be up for election in 2022.

Missouri’s budget institutions, rules, and constraints

Missouri uses an annual budget. The legislature is not required to pass a balanced budget, nor is the governor required to sign one. Deficits may be carried over into the following year. However, the governor must submit a balanced budget, and own-source revenue and debt must meet or exceed expenditures. Missouri further limits annual revenue growth with a budget rule based on personal income growth. This is a binding rule and requires a vote of the people to override it. A two-thirds supermajority is also required for legislation that raises taxes. The state also limits total authorized debt incurred by the state.

(Note: Some states have informal budget institutions that constrain overall spending growth or a specific expenditure’s growth.)

Missouri’s recent fiscal debates

• As of November 2019, Missouri was one of just two states (the other being Florida) that had not passed legislation in response to the 2018 Supreme Court decision that gave states the authority to require remote sellers to collect online sales taxes. The Missouri legislature introduced bills to establish an economic nexus rule in 2018 and 2019, but neither were approved. Governor Parson, who favors enacting such a law, estimates the state is missing out on $100 million to $150 million in tax revenue annually without online sales tax legislation.
  
• In July 2019, the governor signed a bill that ended a tax-break “border war” with neighboring Kansas. The legislation prohibits offering tax incentives to businesses in Kansas City in hopes of luring them across state lines. Kansas Governor Laura Kelly later signed a similar executive order, establishing a truce between the two states. Although tax incentives for economic development are often fraught policies, their use in Kansas and Missouri was particularly problematic because the states spent hundreds of millions of dollars on tax breaks merely so businesses would move a few blocks within the same metro area.
  
• Missouri wants to increase transportation spending but cannot agree on a funding plan. In 2018, Missouri voters rejected a ballot initiative (Proposition D) that proposed increasing the state’s motor fuel tax from 17 cents to 27 cents per gallon over four years. In 2014, voters rejected a ballot initiative (Amendment 7) that proposed increasing the state sales tax rate to pay for more transportation spending. The governor and legislature have debated but have still not found a long-term funding solution for transportation.

Missouri’s current budget

Governor Parson released his proposed FY 2020 budget in January 2019. Both his budget and his 2019 state of the state address focused heavily on workforce development. The governor proposed increased spending on community colleges, technical schools, and job-training programs. He also proposed increased borrowing to pay for his transportation plan.

The legislature passed its budget in June 2019. It generally followed the governor’s recommendations, including his short-term transportation plan; as a result, he made no line-item vetoes.

Governor Parson released his proposed FY 2021 budget and gave his 2020 state of the state address in January 2020.

For more on Missouri’s budget, see

• the Missouri Office of Administration: Budget & Planning and
  
• the Missouri Accountability Portal.

Missouri’s economic trends

Missouri’s per capita income (per the Bureau of Economic Analysis) was $49,589 in 2019, ranking 33rd among the states. It was below both the national average of $56,663 and the Plains regional average of $54,157. The state’s median household income (five-year estimate) was $53,560 in 2018, ranking 36th among the states and below the national average of $60,293. Missouri’s poverty rate was 14.2 percent in 2018 (five-year estimate), above the national rate of 14.1 percent.

Although Missouri’s averages tell a story about the entire state, Missouri is composed of diverse localities. For example, the city of Rolla’s median household income was $34,934, and its poverty rate was 31.1 percent; the city of Wildwood’s median household income was $132,221, and its poverty rate was 2.6 percent.

Missouri’s unemployment rate historically tracks the national average. (See how COVID-19 is affecting state employment and earnings data.)

The major industries that contributed the most to Missouri’s gross domestic product (GDP) in 2019 were finance, professional services, manufacturing, government, and social services (i.e. health and education). Professional services and social services contributed more to Missouri’s GDP than they did to the nation’s and region’s GDP, while finance was less important to Missouri than it was to the nation and region in 2019.

Looking at more specific industries, among those that accounted for at least one percent of Missouri’s GDP in 2018, hospitals produced far more for the state than for the nation, contributing 3.6 percent to Missouri’s GDP and 2.4 percent to the nation’s. Other industries that overperformed in Missouri relative to national averages in 2018 were management of companies, wholesale trade, food and beverage manufacturing, and motor vehicle manufacturing.