Missouri’s budget basics

According to the National Association of State Budget Officers (NASBO), Missouri’s total expenditures in fiscal year (FY) 2020 were $27.3 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2020 were $2.3 trillion, ranging from $4.7 billion in Wyoming to $337.7 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 $48.5 billion in FY 2018 (the most recent year census data were available), or $7,918 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 $9,801.

Missouri’s largest spending areas per capita were elementary and secondary education ($1,749) and public welfare ($1,610). 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 $49.6 billion in FY 2018, or $8,099 per capita. National per capita general revenues were $10,071. Missouri uses all major state and local taxes. After federal transfers, Missouri’s largest sources of per capita revenue were charges ($1,382), such as state university tuition and highway tolls, and individual income taxes ($1,132).

Missouri’s politics

Governor Mike Parson, a Republican, was elected in 2020 with 57 percent of the vote. The next gubernatorial election is in 2024.

Republicans control both the House of Representatives (114 Republicans to 49 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 2022 because representatives serve two-year terms. Senators serve four-year terms; roughly half the senatorial seats are on the ballot in 2022, and the other half will be up for election in 2024.

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 FY 2021 budget proposal in January 2020. The governor proposed $30.6 billion in total spending—a 1.5 percent increase over FY 2020 spending—including $10.4 billion in general-fund spending (a 2.3 percent increase over the previous year).

Missouri enacted its FY 2021 budget in June 2020. The enacted budget included $35.3 billion in total spending, or $4.7 billion more than the governor had proposed. The additional total spending was almost entirely the result of federal funds from the CARES Act. The approved general fund budget was $10.1 billion—lower than both FY 2020 enacted spending and the governor’s prepandemic proposal for the fiscal year. Further, Governor Parson issued 17 vetoes and announced budget withholds that totaled over $448 million.

Governor Parson has released his proposed FY 2022 budget and gave his State of the State address in January 2021. His budget contains $34.1 billion in total spending (which is an 11 percent decrease from enacted FY 2021 spending) as well as $10.6 billion in general-fund spending. The proposal includes a 2 percent pay increase for state employees but maintains K-12 spending at their reduced levels

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 $51,177 in 2020, ranking 36th among the states. It was below both the national average of $59,729 and the Plains regional average of $56,321. The state’s median household income (five-year estimate) was $55,461 in 2019, ranking 38th among the states and below the national average of $62,843. Missouri’s poverty rate was 13.7 percent in 2019 (five-year estimate), above the national rate of 13.4 percent.

Although Missouri’s averages tell a story about the entire state, Missouri is composed of diverse localities. For example, the city of Springfield’s median household income was $36,856, and its poverty rate was 22.9 percent; the city of Wildwood’s median household income was $135,202, and its poverty rate was 3 percent.

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

Unemployment rates (like other economic indicators) often vary significantly by race and ethnicity. In Missouri, the average unemployment rate in 2020 was 5.6 percent for white residents, 9.4 percent for Black residents, and 7 percent for Latino residents.