State and Local Government
Budgetary Reform
THE PROBLEM
Missouri’s budget is growing faster than the state’s economy, and current budgeting practices make the state’s financial problems worse.
THE SOLUTION
Limit spending growth, increase accountability, and improve budget resilience through reforms that prioritize Missouri’s long-term financial health.
Spending at Record Levels
Missouri’s budget has grown dramatically in recent years, fueled in part by unusually strong revenue growth and an influx of federal funds. Those temporary conditions are disappearing while much of the spending remains. The state auditor recently warned that without significant changes, Missouri could exhaust its accumulated general revenue balance during fiscal year 2028.
The problem goes beyond how much Missouri spends. The auditor concluded that Missouri’s budget process is “broken.” Known expenses are routinely left out of the initial budget and funded later through supplemental appropriations; meanwhile, the governor blocks hundreds of millions of dollars in spending that lawmakers have approved. The result is a budget that does not accurately represent the expected cost of state government.
Current Practices Encourage More and More Spending
Missouri uses an “incremental” approach to budgeting: Each year’s spending automatically becomes next year’s baseline. This practice lets legislators focus on new funding requests, but it also allows old programs to escape scrutiny, producing snowballing government growth. Missouri should require agencies to establish meaningful performance measures and evaluate whether programs are accomplishing their goals.
You Can’t Fix What You Can’t See
Budget documents are often difficult to find, interpret, and analyze, and tax credits compound the problem. Missouri awards nearly $1 billion each year in tax credits; these are the fiscal equivalent of state spending but receive little scrutiny in the annual appropriations process. Missouri should publish budget documents in accessible, machine-readable formats and make tax credits visible alongside traditional spending in its yearly budgeting process.
Missouri Isn’t Ready for the Next Recession
Missouri’s Budget Reserve Fund is too small and too restrictive to adequately protect the state during a serious economic downturn. Missouri should create a separate budget stabilization fund large enough to replace lost revenue during a crisis on the scale of the recession experienced from 2007 to 2009, with strong protections against improper use of funds and repayment tied to the pace of economic recovery.
POLICY RECOMMENDATIONS
- Establish clear and meaningful state program performance metrics that allow for objective assessments.
- Require the enacted budget to reflect a full 12 months of known, anticipated costs rather than routinely deferring expenditures to supplemental appropriations.
- Make all state budget documents available in easily accessible, machine-readable formats (e.g., in Excel or CSV format).
- Include all tax credits, or tax expenditures, in the state’s yearly budgeting process.
- Create a separate budget stabilization fund large enough to replace lost revenue during a crisis on the scale of the 2007–2009 Great Recession, with strong protections against improper use of funds and repayment tied to the pace of economic recovery.
