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State and Local Government

Special Session a Reminder of Budgetary Troubles

By Elias Tsapelas on Nov 25, 2020
Missouri State Capitol Rotunda
Nagel Photography / Shutterstock

Missouri is still dealing with COVID-19, and the hole in the state’s budget is only getting deeper. Last week, the state legislature began its second special session of the year, and it is expected that this session will add more than a billion dollars to the budget. This new funding is on top of the record-setting $30-billion spending plan approved roughly six months ago. While most of this soon to be approved funding will come from the federal government, the extraordinary session offers an important reminder of the trouble that lies ahead.

The pandemic has already taken a serious toll on our government’s budget. The virus, combined with lockdowns and other restrictions placed on businesses, has drastically decreased economic activity, which in turn has lowered state and local tax revenues. For the fiscal year that ended on June 30th, Missouri’s collected 6.6 percent less in revenues than it did the year before. And this year, the governor has already restricted more than $400 million in state spending, indicating his budget staff believes the decline in tax revenues will persist for some time.

Over the past eight months, Missouri has been unable to spend hundreds of millions in state tax dollars that otherwise would have gone toward priorities such as education and public safety. At the same time, the cost of other state programs has increased as a result of the virus. It is true that some of these issues have been temporarily alleviated by generous federal relief efforts. But federal support cannot fill the hole created by COVID-19 for every state priority (the federal government places restrictions on where the money can be spent). More importantly, this funding is a short-term solution to a long-term problem.

Missouri was unprepared for the current situation in large part because state spending has been growing for years. We must also realize that it’s becoming increasingly likely the virus will be defeated before tax revenues return to pre-pandemic levels. For that reason, it’s time to start thinking about how our elected officials will respond once the state’s budget is no longer being propped up by federal aid.

In the coming months, Missouri’s policymakers should consider every option that could help contain the state’s runaway spending trajectory and shrink the size of government to match the revenue projections of the years ahead. There’s no doubt the task will be difficult, but it’s all but certain the cost of acting now will be lower than if we wait until it’s too late.

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About the author

Elias Tsapelas

Director of State Budget and Fiscal Policy

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