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Missouri’s Budget: A Primer (Update)

Posted on December 20, 2021January 13, 2026 by Elias Tsapelas

Nearly three years ago, my essay “Missouri’s Budget: A Primer” was published. In the years since, a lot has changed in our state, including the size of the budget. Today, Missouri’s budget is the biggest it’s ever been, and is more than $3.6 billion larger than it was in 2019. With billions in federal aid sent to our state over the past year and billions more on the way, understanding the process for how our elected officials choose to spend state tax dollars is more important than ever, which is why I decided to update this primer.

Next month during his State of the State address, Governor Parson will lay out his budget recommendations for the 2023 fiscal year. In addition, there are supplemental funding requests for our current fiscal year that require immediate legislative attention. The Department of Elementary and Secondary Education has requested approximately $2 billion be appropriated from federal relief funds by April, Missouri’s Medicaid expansion population will run out of funding soon, and the governor has recommended a $15 minimum wage along with a 5.5% pay raise for state employees starting February 1st.

My updated report provides the context necessary to fully understand the tough task ahead for Missouri’s legislature. It also provides a step-by-step explanation of the state’ budgeting process, a graphic explaining the expected timeline for the budget, and a detailed description of many of the difficult decisions required to craft and maintain a constitutionally-required balanced budget. As lawmakers discuss the economic forecasts for the coming year and decide how much to raise future state spending obligations, this report should help provide some valuable insight.

Click here to read the full report.

Competition in Electricity Markets

Posted on December 20, 2021December 16, 2025 by Jakob Puckett

Electricity is vital to all aspects of modern life, making it important that policymakers and citizens understand the laws and regulations governing it. This paper gives an overview of how electricity gets from a fuel source to your home and business, how electricity markets operate, and what policies different states have implemented to reduce electricity prices for their citizens. The report argues that Missouri lawmakers can lower electricity prices by embracing competition and allowing Missourians to choose from competing electric suppliers.

To read the full report, click here.

A Tax Cut is the Gift that Keeps on Giving

Posted on December 17, 2021January 13, 2026 by Corianna Baier

At one time or another, I’m sure you’ve stressed about getting someone the perfect holiday gift. Everyone wants to get their loved ones something they’ll enjoy. And if lawmakers are looking for the perfect gift for their constituents, I can think of (at least) one thing that everyone would find extremely useful: an income tax cut. Stay with me here—this really is a great gift.

An income tax cut is basically the gift of money. Taxpayers would get to keep more of their hard-earned money to spend or save in any way that they want. That means more opportunities for taxpayers and more money that can be spent at Missouri businesses. And it’s the gift that keeps on giving, because you’d get this “extra” money year after year.

This would not only be an individual gift, but also a gift to Missouri’s economy. Income taxes are destructive to growth and disincentivize working. For a number of reasons, Missouri’s economy would be better off if the state relied more on other forms of taxation for revenue.

In recent years, Missouri lawmakers have taken steps to lower the individual income tax. The “Wayfair” bill in 2021, for example, added a reduction of the top income tax rate by 0.1 percent in 2024 and two triggers to eventually lower the top rate to 4.8 percent. But it’s not time to take our foot off the gas. Other states (like North Carolina) are implementing tax cuts, and Missouri should follow suit to support taxpayers and stay competitive.

In the mass of pre-filed bills, I know of at least one that would reduce the income tax, but it’s difficult to predict what will happen in Jefferson City in 2022. If lawmakers really want to give taxpayers a gift (albeit a late gift, given the timing of the legislative session), they’ll consider further income tax cuts this session.

Listen: Dr. Susan Pendergrass on The Missouri School Rankings Project

Posted on December 16, 2021January 13, 2026 by Susan Pendergrass

Missouri schools are failing to teach the core subjects of reading and math, and the most recent test scores show that students are falling further behind. In response to the Missouri Department of Elementary and Secondary Education’s (DESE) failure to perform one of its most basic functions, the Show-Me Institute, in conjunction with Show-Me Opportunity, launched The Missouri School Rankings Project and MoSchoolRankings.org.

On November 18 in St. Louis, Missouri, Susan Pendergrass, director of research and education policy, presented her findings from the Missouri School Rankings Project and give an overview of how to use the website.

Listen to the full event:

Listen on Apple Podcasts

Listen on Sticher

Listen on SoundCloud

An Updated Look at Tax-Increment Financing

Posted on December 15, 2021January 13, 2026 by Corianna Baier

Tax-increment financing (TIF) is a widely used economic development incentive in which property tax revenues are redistributed back to developers. Millions of tax dollars are diverted away from the state, cities, and other taxing districts each year. This report takes an updated look at the use of TIF in Missouri, with data from the 2020 Annual TIF Report produced by the Missouri Department of Revenue. Ultimately, TIF has many procedural problems and little proof of success. With millions of dollars on the line, it’s time for Missouri and its cities to rethink the use of TIF.

Click here to view the report.

Changes to Tax Incentives in the City of St. Louis?

Posted on December 14, 2021January 13, 2026 by David Stokes

The Post-Dispatch ran a story recently about changes being made to how tax incentives are being awarded by the City of St. Louis. The new mayor had campaigned on making changes to the incentive game, and she has, to some extent, made good on her word.

From the story:

The city’s new mayor vetoed two developer tax breaks that she said were too generous. And then she held up final approval of incentive packages for two other projects that had long enjoyed almost unwavering political support — the City Foundry food hall complex and another phase of development in the Cortex tech district.

We have commended these changes to the old way of doing business. For too long, the city has pumped subsidies into the parts of the city that need them the least. So, points given for being more disciplined with the subsidies.

However, it seems that the quick and easy way for developers to get the subsidies they want is simply to make a “donation” to affordable housing. From the story (emphasis and note added):

Of the deals negotiated so far by the Jones administration, a theme has emerged: developers who want incentives are likely to be pushed to include a contribution to affordable housing.

The City Foundry deal required the developer to contribute $1.8 million to the city’s affordable housing trust fund, which helps finance affordable projects around the city. [Three other examples follow in the article.]

We love our subsidies in Missouri for affordable/low-income housing. At the state level, low-income housing tax credits have been abused for years. Now the city’s affordable housing trust fund is all the rage. But you know what? St. Louis (and Missouri) don’t have an affordable housing issue. In fact, a report just came out that says that St. Louis is the only metro area in the country where rents are declining. From the report:

There is one outlier among major American cities bucking this trend. Rents fell 4 percent in St. Louis, and it was the only metro to see a decrease in rent in October compared to a year earlier.

The low housing costs here are a result of many factors, both good (limited land-use regulations) and bad (high crime, etc.). But increasing the subsidies for affordable housing is the least of our region’s needs. And that, come to think of it, may be exactly the point. Solving crime in a high-crime area is very hard. Addressing housing costs in an area with low housing costs is, well, easy.

There are many good reasons for the City of St. Louis to substantially tighten up the tax subsidy process. Using it as a pressure point to get added “donations” to a fund that purports to solve the one problem the city doesn’t have is not one of them.

Even Elon Musk Wouldn’t Support Missouri’s EV Tax Credit Bill

Posted on December 14, 2021January 13, 2026 by Jakob Puckett

Electric vehicles (EVs) are gaining popularity in Missouri and across the country. Thousands of Missourians buy EVs each year; Kansas City is one of the fastest-growing EV markets in the country. Nationwide, EVs are expected to be about 25 percent of new car sales in 2030.

So what do some in the Missouri Legislature want to do with this burgeoning market? Subsidize it, of course. A bill prefiled in the Missouri House would subsidize Missourians for a purchase many are already making by giving out a thousand-dollar refundable tax credit for each EV purchase.

This is so redundant and unnecessary that even Elon Musk wouldn’t support it.

In a recent interview, Musk favored ending subsidies of any kind for all vehicles, whether gasoline or battery-powered.

When asked about the possibility of an up-to $12,500-per-EV tax credit being considered in Congress, Musk criticized it as unnecessary. While most makes of electric vehicles still qualify for the existing $7,500 federal tax credit, Tesla’s cars—which made up over two thirds of all EV purchases this year—haven’t for several years. Admittedly, Musk’s market power may account for some of his opposition to EV tax credits.

Musk also criticized the $7.5 billion dedicated to building EV charging stations in the recently passed federal infrastructure bill, saying that if gas stations don’t need support, EV charging stations shouldn’t either. If he doesn’t support these subsidies, I can’t imagine he’d support Saint Louis-area governments mandating new construction and property renovations being built with EV charging stations.

If the godfather (or Dogefather?) of electric vehicles thinks EV tax credits and subsidized charging stations are unnecessary, shouldn’t we?

Innovative Springfield School Up for $1 Million Prize

Posted on December 13, 2021January 13, 2026 by Michael McShane

The Discovery School of Springfield has been named a finalist for the STOP Award. Presented by the Center for Education Reform and Forbes, the award is intended to “ensure that families, now and in the future, get what they deserve: access to individualized learning opportunities for their students, offered in supportive environments, alongside their peers.”

The Discovery School has an amazing story. When the coronavirus struck in March of 2020, the Discovery Center, a children’s science museum, worked around the clock to transform into a licensed childcare center to continue students’ education even if their schools were closed to in-person instruction. Every member of the team agreed to work in person instead of working from home. By August, it had cultivated a community of learners who wanted to keep the good times going. The Discovery Center leased and renovated a building that used to be part of Everest College and created a space for children to do their virtual learning in small learning pods. By January of 2021, it was ready to launch a standalone school. It currently operates as a private school for students in Springfield. The STOP award created an informative webpage on the school, and it is worth checking out.

Simply by being named a finalist, the school is guaranteed at least $250,000 in prize money. The full prize will be announced December 14th at Forbes’ annual 30 under 30 event.

Missouri Is 49th in a Meaningless Statistic!

Posted on December 10, 2021January 13, 2026 by Michael McShane

Earlier this week a headline came across my Twitter feed blaring “Missouri ranked No. 49 in state K-12 funding in 2020.” It was from earlier this year, but the article somehow started making the rounds again. Maybe it has something to do with the Missouri Legislature prefiling bills for the 2022 session. Who am I to speculate?

Anyway, when the average person reads that headline, what do you think they see? It is most likely that they would think that Missouri is second to last of all the 50 states in what it spends on education. That would be a perfectly reasonable reading of that particular arrangement of words. It would also be wrong.

The article covers a report released by the Missouri Auditor’s office that examined spending trends in Missouri and compared them to other states around the country. Did that report find that Missouri was second to last in the amount of money that it spends? It did not.

In fact, according to the U.S. Census Bureau, in 2020 Missouri was 27th in school spending in the United States, with $11,249 in current spending per pupil per year. Importantly, this is not adjusted for cost of living. Even without that, Missouri is right in the middle of the pack.

No, what the auditor’s report did was look at the percentage of student funding that comes from the state and then compared that to the percentage of funding that comes from the state in other systems around the country, using data from a report by the National Education Association (NEA), the nation’s largest teachers union.

Now, we can set aside for a moment relying on the NEA, which has an obvious vested interest in increasing school spending. But we can still ask what, if anything, we should do with this information. Show-Me Institute analysts have been arguing that Missouri’s funding formula is broken for years. Reforming the funding formula is part of the 2022 Missouri Blueprint. Updating the formula to accurately measure local property tax wealth and thus local effort would be a huge improvement, as would treating charter schools better and providing more flexibility to parents as to where their children can take their funding. That said, using contrived statistics packaged deceptively to make that point isn’t right.

How much we should spend on schools has become a terribly muddled question. When polled, 58 percent of Missourians say that we should be spending more on education. That is, until they are told how much we actually spend. Then it drops to 32 percent. (Interestingly, it drops to 31 percent among school parents.)

Reports like the one from the auditor’s office do not help educate Missourians as to how much we actually spend and how that money is being put to use. It makes the worthy cause of funding formula reform more difficult. And that is a shame.

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