Imagine getting a large one-time bonus, then using that money to buy an expensive new car. There are some obvious parallels to Missouri’s budget.
Shortly before the June 30 deadline, Governor Kehoe signed Missouri’s more-than-$50-billion budget for fiscal year 2027, which began on July 1. He also issued about $53 million in vetoes and more than $400 million in spending restrictions. While the vetoes are generally in line with recent years, the expenditure restrictions are much larger than have been necessary in more than a decade. The restrictions also indicate that the governor believes the legislature approved roughly $400 million more in spending than projected state revenues can support.
Unlike a veto, a spending restriction doesn’t permanently eliminate an appropriation. Instead, it temporarily withholds the authority to spend it. Missouri’s constitution requires the governor to keep the budget balanced throughout the fiscal year, so if projected revenues won’t support all the spending approved by the legislature, the governor must reduce authorized spending through vetoes, restrictions, or a combination of both. The difference is that vetoes are permanent unless the legislature overrides them, while restrictions can be lifted if revenues improve. The governor then decides which restricted appropriations, if any, are ultimately released.
Perhaps the most interesting part of the governor’s budget signing was the explanation he provided for this year’s actions. Kehoe reiterated something he’s said before: Missouri has a spending problem rather than a revenue problem. He also said the state needs to reduce its reliance on what are called general revenue pickups. General revenue is the state’s primary operating fund, supported largely by income and sales taxes. A general revenue pickup occurs when a temporary funding source disappears, leaving general revenue to cover an ongoing expense. That’s exactly how temporary spending becomes a permanent obligation.
The governor’s explanation reflects two concerns I’ve written about repeatedly. First, Missouri’s spending has been growing faster than its revenues. As the auditor has highlighted, between fiscal years 2020 and 2025, general revenue collections increased 45.8 percent. During that same period, general revenue spending increased 53.4 percent, more than double the rate of inflation.
Second, lawmakers treated the surge in temporary federal COVID relief and an extraordinary period of state revenue growth as an opportunity to expand ongoing commitments. As those temporary dollars disappeared, the state became increasingly reliant on general revenue pickups, shifting costs that had once been covered by other funding sources onto Missouri taxpayers.
Remember the car? If soon after your purchase you found you couldn’t afford your new car, nobody would say you had an income problem. They’d rightfully say you spent too much. Missouri’s budget shouldn’t be viewed differently. The good news is that Governor Kehoe’s actions indicate he has correctly identified the problem. Now it’s up to lawmakers to get serious about solving it.
