TO THE HONORABLE MEMBERS OF THE COMMITTEE

Thank you for the opportunity to testify. My name is Elias Tsapelas, and I’m the Director of State Budget and Fiscal Policy at the Show-Me Institute, a nonprofit, nonpartisan, Missouri-based think tank that advances sensible, well-researched, free-market solutions to state and local policy issues. The ideas presented here are my own and are offered in consideration of proposals that will affect tax credits in Missouri.

Senate Bill 1079 consolidates Missouri’s existing film and series production tax credit sub-caps into a single $16 million pool for both, leaving the state’s total commitment the same. The only substantive effect of the bill would be to give the Film Office more flexibility in how the same dollars are allocated. That flexibility does not address the fundamental problem with this program.

Current and Past Tax Credit Failures

Despite the Missouri film tax credit’s recent revival, our state has a long history with this troubling incentive. Until its sunset in 2013, Missouri’s previous iteration made promises similar to what supporters are touting today. Missouri’s own Tax Credit Review Commission recommended the credit be eliminated because it served too narrow an industry and failed to provide a positive return on investment.¹

Research confirms that pattern holds nationally. Film tax credits have not resulted in job growth, have not affected market share or industry output, and have produced only short-term wage gains for those already in the industry.² Credits in many states generated just cents on the dollar. As one Tax Foundation analyst notes, “non-favored activities and businesses remain on the hook to bear the full impact of the state’s tax code.”³

The Missouri Film Office has pointed to the number of projects approved and production spending in the state as evidence the program is working, but that is not the right measure for determining whether the program is a good investment for state taxpayers.⁴ The relevant question is how much the state receives back in tax revenue and broader economic activity—and by that measure, the research is consistent: film tax credits do not generate a positive return.

The Competitiveness Argument Doesn’t Hold

Supporters of SB 1079 argue that pooling the sub-caps will make Missouri more competitive for productions. Even setting aside the ROI question, that argument doesn’t hold.

Steven Conrad, the showrunner who created a new HBO series set in St. Louis and filmed it entirely in Atlanta, recently suggested that governments may not be well-served by chasing the film industry at all.⁵ His observation reflects a structural reality: Georgia has spent two decades building the studios, crews, soundstages, and production infrastructure that make large productions possible. Missouri has not. No reallocation of $16 million changes that.

Georgia’s own state auditor found that even Georgia’s fully developed, deeply established program returned just 10 cents to the state for every dollar of credit granted, producing a net revenue loss of $602 million in a single year.⁶ If one of the most mature film-incentive programs in the country cannot generate a positive return on investment, a program at a fraction of its scale operating in a state without comparable infrastructure has no prospect of doing so.

Targeted Credits Are Poor Economic Policy

Targeted economic development tax credits are just another way for lawmakers to pick winners and losers, a job that is better left to consumers in the market. When tax breaks are given to some, other taxpayers have to make up for the lost revenue. The impulse to do something to support an industry is understandable, but tax credits are a poor substitute for the conditions that make industries thrive organically. A dollar of film tax credits reduces state revenue by exactly the same amount as a dollar of direct appropriations—the difference is that credits bypass the appropriations process and receive less scrutiny.

Prioritize Tax Relief That Benefits All Missourians

Missouri is already a national leader in state spending in the name of economic development. Over the past few decades, Missouri has forgone billions in state tax revenue in favor of a host of narrow incentives that have consistently shown poor results. In FY2025 alone, Missouri redeemed more than $961 million in tax credits—nearly double the $521 million redeemed in 2010.⁷ The General Assembly is simultaneously weighing whether to eliminate the state income tax, a reform that would deliver broad economic benefits to every Missourian. The legislature should consider whether a growing tax credit portfolio is consistent with that goal. Expanding targeted credits that erode the income-tax base works against broad-based tax relief, and Missouri would be better served by pursuing the latter.

The film tax credit is a small program, but it exemplifies the approach to tax policy that makes comprehensive reform harder to achieve. Tax credit programs have not been successful in Missouri in the past, there is little evidence to suggest the film tax credit is succeeding now, and there is no reason to believe this program will perform differently under a restructured allocation. If increasing economic opportunity is the goal, the research is clear: Instead trying to manufacture more opportunities at the expense of taxpayers, lawmakers should provide broad-based tax relief to every Missourian.

NOTES

1. “Report of the Missouri Tax Credit Review Commission.” Missouri Tax Credit Review Commission. 2010; https://www.semissourian.com/files/tcrcfinalreport113010.pdf.
2. “Lights, camera and no action: How state film subsidies fail.” USC Press Release. August 18, 2016; https://pressroom.usc.edu/lights-camera-and-no-action-how-state-film-subsidies-fail.
3. Loughead, Katherine. “Illuminating the Hidden Costs of State Tax Incentives.” Tax Foundation. 2021; https://taxfoundation.org/state-tax-incentives-costs.
4. “Made-in-Missouri Film and TV Productions Spent $40.7 Million in 2025.” Missouri Department of Economic Development. February 2026; https://ded.mo.gov/press-room/made-missouri-film-and-tv-productions-spent-407-million-2025.
5. Neman, Daniel. “HBO’s DTF St. Louis has a dream cast, but it wasn’t shot here.” St. Louis Post-Dispatch. February 26, 2026; https://www.stltoday.com/life-entertainment/local/movies-tv/article_cfa2d34c-435a-40fd-9fa5-75933d716915.html.
6. “Impact of the Georgia Film Tax Credit.” Georgia Department of Audits and Accounts, Performance Audit Division. Report No. 18-03B. January 2020; https://www.audits.ga.gov/ReportSearch/download/23536.
7. “Fourth Quarter Tax Credit Report, Fiscal Year 2025.” Missouri Department of Revenue. 2025; https://dor.mo.gov/public-reports/documents/Fourth-Quarter-FY25-Tax-Credit-Report.pdf.

The post Senate Bill 1079: Film Tax Credits appeared first on Show-Me Institute.

TO THE HONORABLE MEMBERS OF THE COMMITTEE

Thank you for the opportunity to testify. My name is Elias Tsapelas, and I’m the Director of State Budget and Fiscal Policy at the Show-Me Institute, a nonprofit, nonpartisan, Missouri-based think tank that advances sensible, well-researched, free-market solutions to state and local policy issues. The ideas presented here are my own and are offered in consideration of proposals that will affect tax credits in Missouri.

House Bill 2142 consolidates Missouri’s existing film and series production tax credit sub-caps into a single $16 million pool for both, leaving the state’s total commitment the same. The only substantive effect of the bill would be to give the Film Office more flexibility in how the same dollars are allocated. That flexibility does not address the fundamental problem with this program.

Current and Past Tax Credit Failures

Despite the Missouri film tax credit’s recent revival, our state has a long history with this troubling incentive. Until its sunset in 2013, Missouri’s previous iteration made promises similar to what supporters are touting today. Missouri’s own Tax Credit Review Commission recommended the credit be eliminated because it served too narrow an industry and failed to provide a positive return on investment.¹

Research confirms that pattern holds nationally. Film tax credits have not resulted in job growth, have not affected market share or industry output, and have produced only short-term wage gains for those already in the industry.² Credits in many states generated just cents on the dollar. As one Tax Foundation analyst notes, “non-favored activities and businesses remain on the hook to bear the full impact of the state’s tax code.”³

The Missouri Film Office has pointed to the number of projects approved and production spending in the state as evidence the program is working, but that is not the right measure for determining whether the program is a good investment for state taxpayers.⁴ The relevant question is how much the state receives back in tax revenue and broader economic activity—and by that measure, the research is consistent: film tax credits do not generate a positive return.

The Competitiveness Argument Doesn’t Hold

Supporters of HB 2142 argue that pooling the sub-caps will make Missouri more competitive for productions. Even setting aside the ROI question, that argument doesn’t hold.

Steven Conrad, the showrunner who created a new HBO series set in St. Louis and filmed it entirely in Atlanta, recently suggested that governments may not be well-served by chasing the film industry at all.⁵ His observation reflects a structural reality: Georgia has spent two decades building the studios, crews, soundstages, and production infrastructure that make large productions possible. Missouri has not. No reallocation of $16 million changes that.

Georgia’s own state auditor found that even Georgia’s fully developed, deeply established program returned just 10 cents to the state for every dollar of credit granted, producing a net revenue loss of $602 million in a single year.⁶ If one of the most mature film-incentive programs in the country cannot generate a positive return on investment, a program at a fraction of its scale operating in a state without comparable infrastructure has no prospect of doing so.

Targeted Credits Are Poor Economic Policy

Targeted economic development tax credits are just another way for lawmakers to pick winners and losers, a job that is better left to consumers in the market. When tax breaks are given to some, other taxpayers have to make up for the lost revenue. The impulse to do something to support an industry is understandable, but tax credits are a poor substitute for the conditions that make industries thrive organically. A dollar of film tax credits reduces state revenue by exactly the same amount as a dollar of direct appropriations—the difference is that credits bypass the appropriations process and receive less scrutiny.

Prioritize Tax Relief That Benefits All Missourians

Missouri is already a national leader in state spending in the name of economic development. Over the past few decades, Missouri has forgone billions in state tax revenue in favor of a host of narrow incentives that have consistently shown poor results. In FY2025 alone, Missouri redeemed more than $961 million in tax credits—nearly double the $521 million redeemed in 2010.⁷ The General Assembly is simultaneously weighing whether to eliminate the state income tax, a reform that would deliver broad economic benefits to every Missourian. The legislature should consider whether a growing tax credit portfolio is consistent with that goal. Expanding targeted credits that erode the income-tax base works against broad-based tax relief, and Missouri would be better served by pursuing the latter.

The film tax credit is a small program, but it exemplifies the approach to tax policy that makes comprehensive reform harder to achieve. Tax credit programs have not been successful in Missouri in the past, there is little evidence to suggest the film tax credit is succeeding now, and there is no reason to believe this program will perform differently under a restructured allocation. If increasing economic opportunity is the goal, the research is clear: Instead trying to manufacture more opportunities at the expense of taxpayers, lawmakers should provide broad-based tax relief to every Missourian.

NOTES

1. “Report of the Missouri Tax Credit Review Commission.” Missouri Tax Credit Review Commission. 2010; https://www.semissourian.com/files/tcrcfinalreport113010.pdf.
2. “Lights, camera and no action: How state film subsidies fail.” USC Press Release. August 18, 2016; https://pressroom.usc.edu/lights-camera-and-no-action-how-state-film-subsidies-fail.
3. Loughead, Katherine. “Illuminating the Hidden Costs of State Tax Incentives.” Tax Foundation. 2021; https://taxfoundation.org/state-tax-incentives-costs.
4. “Made-in-Missouri Film and TV Productions Spent $40.7 Million in 2025.” Missouri Department of Economic Development. February 2026; https://ded.mo.gov/press-room/made-missouri-film-and-tv-productions-spent-407-million-2025.
5. Neman, Daniel. “HBO’s DTF St. Louis has a dream cast, but it wasn’t shot here.” St. Louis Post-Dispatch. February 26, 2026; https://www.stltoday.com/life-entertainment/local/movies-tv/article_cfa2d34c-435a-40fd-9fa5-75933d716915.html.
6. “Impact of the Georgia Film Tax Credit.” Georgia Department of Audits and Accounts, Performance Audit Division. Report No. 18-03B. January 2020; https://www.audits.ga.gov/ReportSearch/download/23536.
7. “Fourth Quarter Tax Credit Report, Fiscal Year 2025.” Missouri Department of Revenue. 2025; https://dor.mo.gov/public-reports/documents/Fourth-Quarter-FY25-Tax-Credit-Report.pdf.

The post House Bill 2142: Film Tax Credits appeared first on Show-Me Institute.

TO THE HONORABLE MEMBERS OF THE COMMITTEE

Thank you for the opportunity to testify. My name is Elias Tsapelas, and I’m the Director of State Budget and Fiscal Policy at the Show-Me Institute, a nonprofit, nonpartisan, Missouri-based think tank that advances sensible, well-researched, free-market solutions to state and local policy issues. The ideas presented here are my own and are offered in consideration of proposals that will affect tax credits in Missouri.

House Bill 2058 consolidates Missouri’s existing film and series production tax credit sub-caps into a single $16 million pool for both, leaving the state’s total commitment the same. The only substantive effect of the bill would be to give the Film Office more flexibility in how the same dollars are allocated. That flexibility does not address the fundamental problem with this program.

Current and Past Tax Credit Failures

Despite the Missouri film tax credit’s recent revival, our state has a long history with this troubling incentive. Until its sunset in 2013, Missouri’s previous iteration made promises similar to what supporters are touting today. Missouri’s own Tax Credit Review Commission recommended the credit be eliminated because it served too narrow an industry and failed to provide a positive return on investment.¹

Research confirms that pattern holds nationally. Film tax credits have not resulted in job growth, have not affected market share or industry output, and have produced only short-term wage gains for those already in the industry.² Credits in many states generated just cents on the dollar. As one Tax Foundation analyst notes, “non-favored activities and businesses remain on the hook to bear the full impact of the state’s tax code.”³

The Missouri Film Office has pointed to the number of projects approved and production spending in the state as evidence the program is working, but that is not the right measure for determining whether the program is a good investment for state taxpayers.⁴ The relevant question is how much the state receives back in tax revenue and broader economic activity—and by that measure, the research is consistent: film tax credits do not generate a positive return.

The Competitiveness Argument Doesn’t Hold

Supporters of HB 2058 argue that pooling the sub-caps will make Missouri more competitive for productions. Even setting aside the ROI question, that argument doesn’t hold.

Steven Conrad, the showrunner who created a new HBO series set in St. Louis and filmed it entirely in Atlanta, recently suggested that governments may not be well-served by chasing the film industry at all.⁵ His observation reflects a structural reality: Georgia has spent two decades building the studios, crews, soundstages, and production infrastructure that make large productions possible. Missouri has not. No reallocation of $16 million changes that.

Georgia’s own state auditor found that even Georgia’s fully developed, deeply established program returned just 10 cents to the state for every dollar of credit granted, producing a net revenue loss of $602 million in a single year.⁶ If one of the most mature film-incentive programs in the country cannot generate a positive return on investment, a program at a fraction of its scale operating in a state without comparable infrastructure has no prospect of doing so.

Targeted Credits Are Poor Economic Policy

Targeted economic development tax credits are just another way for lawmakers to pick winners and losers, a job that is better left to consumers in the market. When tax breaks are given to some, other taxpayers have to make up for the lost revenue. The impulse to do something to support an industry is understandable, but tax credits are a poor substitute for the conditions that make industries thrive organically. A dollar of film tax credits reduces state revenue by exactly the same amount as a dollar of direct appropriations—the difference is that credits bypass the appropriations process and receive less scrutiny.

Prioritize Tax Relief That Benefits All Missourians

Missouri is already a national leader in state spending in the name of economic development. Over the past few decades, Missouri has forgone billions in state tax revenue in favor of a host of narrow incentives that have consistently shown poor results. In FY2025 alone, Missouri redeemed more than $961 million in tax credits—nearly double the $521 million redeemed in 2010.⁷ The General Assembly is simultaneously weighing whether to eliminate the state income tax, a reform that would deliver broad economic benefits to every Missourian. The legislature should consider whether a growing tax credit portfolio is consistent with that goal. Expanding targeted credits that erode the income-tax base works against broad-based tax relief, and Missouri would be better served by pursuing the latter.

The film tax credit is a small program, but it exemplifies the approach to tax policy that makes comprehensive reform harder to achieve. Tax credit programs have not been successful in Missouri in the past, there is little evidence to suggest the film tax credit is succeeding now, and there is no reason to believe this program will perform differently under a restructured allocation. If increasing economic opportunity is the goal, the research is clear: Instead trying to manufacture more opportunities at the expense of taxpayers, lawmakers should provide broad-based tax relief to every Missourian.

NOTES

1. “Report of the Missouri Tax Credit Review Commission.” Missouri Tax Credit Review Commission. 2010; https://www.semissourian.com/files/tcrcfinalreport113010.pdf.
2. “Lights, camera and no action: How state film subsidies fail.” USC Press Release. August 18, 2016; https://pressroom.usc.edu/lights-camera-and-no-action-how-state-film-subsidies-fail.
3. Loughead, Katherine. “Illuminating the Hidden Costs of State Tax Incentives.” Tax Foundation. 2021; https://taxfoundation.org/state-tax-incentives-costs.
4. “Made-in-Missouri Film and TV Productions Spent $40.7 Million in 2025.” Missouri Department of Economic Development. February 2026; https://ded.mo.gov/press-room/made-missouri-film-and-tv-productions-spent-407-million-2025.
5. Neman, Daniel. “HBO’s DTF St. Louis has a dream cast, but it wasn’t shot here.” St. Louis Post-Dispatch. February 26, 2026; https://www.stltoday.com/life-entertainment/local/movies-tv/article_cfa2d34c-435a-40fd-9fa5-75933d716915.html.
6. “Impact of the Georgia Film Tax Credit.” Georgia Department of Audits and Accounts, Performance Audit Division. Report No. 18-03B. January 2020; https://www.audits.ga.gov/ReportSearch/download/23536.
7. “Fourth Quarter Tax Credit Report, Fiscal Year 2025.” Missouri Department of Revenue. 2025; https://dor.mo.gov/public-reports/documents/Fourth-Quarter-FY25-Tax-Credit-Report.pdf.

The post House Bill 2058: Film Tax Credits appeared first on Show-Me Institute.

Shortly before the end of last year, the auditor’s office released a report urging lawmakers to take “immediate action” to curb the trend of deficit spending before more drastic cuts become necessary. For longtime readers of the Show-Me Institute blog, this assessment will sound familiar. The report reinforces concerns that have been visible in Missouri’s budget data for more than half a decade.

Reviewing recent revenue and spending trends helps illustrate the problem. Between 2020 and 2025, Missouri’s general revenue collections increased by 45.8 percent, largely driven by income and sales tax growth. Over the same period, general revenue expenditures increased by 53.4 percent. That spending growth more than doubled the rate of inflation, which rose 24.5 percent during those years. Even strong revenue growth was not enough to keep pace.

This imbalance was made possible by a temporary windfall. Although Missouri operates under a constitutional balanced budget requirement, lawmakers were able to commit to higher spending because of a large influx of federal COVID relief funds, combined with stronger-than-expected tax collections. That surge produced a record general revenue balance of nearly $6 billion in 2023. Rather than treating those conditions as temporary, the state locked in higher ongoing spending through pay raises and program expansions, among other things. Since then, the surplus has been largely exhausted.

Looking ahead, fiscal pressures are likely to get worse. Governor Kehoe’s recent budget recommendations project a decline in expected revenues this fiscal year and only minimal growth in Fiscal Year 2027. The outlook deteriorates further when you consider the chance of an economic downturn. Using the worst three-year revenue decline Missouri experienced between 2003 and 2025, the auditor estimates the general revenue fund would be depleted by 2027. Under that scenario, the state would face a deficit exceeding $3.8 billion. And while Missouri’s Budget Reserve Fund (rainy day fund) holds approximately $950 million, as I’ve written before, constitutional restrictions sharply limit its usefulness in addressing an ongoing budget shortfall.

As the general assembly begins working on next year’s budget, the auditor’s report should remain front of mind. There’s still time to rein in the state’s out-of-control spending if Missouri’s lawmakers are willing to start making the tough decisions that right-sizing government entails. The question is no longer whether adjustment is needed, but instead how long until fiscal disaster strikes.

The post The Auditor Confirms Missouri’s Budget Problem appeared first on Show-Me Institute.

When Governor Kehoe signed the FY 2026 budget into law last June, after vetoing more than $2 billion in spending approved by the legislature, the total came to nearly $51 billion, with $15.4 billion coming from state general revenues. Given that Missouri’s budget totaled barely $27 billion less than a decade ago, it may seem hard to believe that a $51 billion budget could still understate the cost of state government. Nevertheless, the budget left out more than $1 billion in anticipated Medicaid spending.

This is not a matter of miscounting or bad estimates. While projecting costs more than a year in advance is never perfect, what is happening here is more straightforward. State lawmakers are knowingly approving budgets that do not include enough funding to last the full fiscal year. Missouri’s budget director acknowledged as much when he testified before the House Budget Committee this past week.

Although the issue likely extends beyond Medicaid, the program provides the clearest illustration of the problem. For the vast majority of enrollees, Medicaid costs the state a predictable monthly payment to a managed care provider (essentially a health insurance company). Enrollment today is roughly the same as it was one year ago. Yet the supplemental funding request for FY 2026—the amount needed to carry the budget through June 30—exceeds $3.2 billion, with more than $1 billion devoted to Medicaid alone. That increase far outpaces any reasonable measure of inflation and reflects a budget that did not include a full year of known costs.

This is not a new pattern. When I wrote about Missouri’s budget mirage last year, the legislature was facing a nearly $2 billion supplemental request, with Medicaid again serving as a significant driver. In practical terms, the $51 billion budget approved last year is now expected to end closer to $54 billion in total spending. With the governor’s FY 2027 budget recommendations totaling $54.5 billion, including $16.3 billion from general revenue, taxpayers are left to wonder how closely that figure will track reality.

Much has been said about the need to rein in Missouri’s out-of-control spending. But a necessary first step in rightsizing state government is being clear about how much it costs in the first place. Systematically underfunding known obligations and backfilling them later makes it difficult for taxpayers to understand the true size of the budget and the choices policymakers are making. Perhaps more importantly, an understated baseline makes it harder for lawmakers to evaluate new spending proposals or identify meaningful savings because they aren’t aware of the true cost of their existing commitments.

As legislators begin work on next year’s budget, the best place for them to start is with transparency.

The post The Budget Mirage Reappears appeared first on Show-Me Institute.

Longtime readers of the Show-Me Institute blog won’t be surprised by this admission, but hearing the governor finally acknowledge our state’s spending problem hopefully signals a coming course correction. This stands in stark contrast to Missouri’s lawmakers in recent years, who have largely ignored how out of control state government spending has become, despite all the data to the contrary.

Prior to state Fiscal Year (FY) 2026, which began on July 1, Governor Kehoe signed a $50.8 billion spending plan, which was about $2 billion less than what the general assembly sent him. It should be noted, and lauded, that the governor applied some fiscal sanity by vetoing more than 200 spending items. But it’s also important to keep perspective on our state’s current financial mess and how much work fixing it will require.

It’s easy to forget that as recently as FY 2019, Missouri’s government only spent a little more than $27 billion in total compared to the $50 billion for 2025. What’s changed? Missouri’s spending has exploded on almost everything: welfare, education, transportation—you name it, and spending on it probably increased.

In 2019, Missouri’s budget included a little more than $9 billion in general revenue funds (primarily state sales and income tax collections) and nearly $9.6 billion from the federal government. Today, our state plans to spend more than $15.6 billion in general revenue and $24.5 billion in federal funds. If you compare this to the state’s estimates for general revenue collections in the coming year of $15.3 billion, you can see that even after the governor’s vetoes, Missouri’s government is still expecting to spend $300 million more than it projects to bring in. That doesn’t even account for the high likelihood of supplemental funding requests later in the year, and that the state’s supply of federal funding is projected to fall by the billions.

Missouri taxpayers are stuck with a government spending far beyond its means. As recently as 2023, Missouri had nearly $8 billion in general revenue funds set aside that could have been saved for times of need, but instead the state has spent exorbitantly, whittling away at the surplus. Today, those excess funds have been almost entirely depleted. Governor Kehoe recently noted that without his actions to reduce spending, the state was expecting a billion-dollar shortfall going into the next fiscal year.

It’s hard to look at what’s happened with Missouri’s budget over the past five years and view it as anything but a squandered opportunity. Our elected officials managed to take historic tax revenue growth, unprecedented federal investment, and an $8 billion cash reserve and turn all that into a billion-dollar hole in the budget right as the state’s revenue forecasts are taking a turn for the worse. Going into next year, Missouri’s tax collections are projected to decline and there will be no more excess federal dollars to prop up the state’s unsustainable spending. It should go without saying that it is imperative that Missouri’s lawmakers finally get serious about getting the state’s finances back on track.

There’s no longer any dispute about whether Missouri’s finances are a problem. The better question is whether it’s too late to stop the bleeding. Perhaps the most important task for our state’s elected officials over the next year will be finding a solution that’s better than something akin to putting a Band-Aid on a bullet wound.

The post Missouri’s Squandered Opportunity appeared first on Show-Me Institute.

Governor Kehoe’s first budget does not include the $300 million requested for the formula (although it does include $200 million in other additional funding). So, let’s break down the requested increase to see if the governor is refusing to “fully fund the formula,” as accused. Perhaps instead the requested increase is not reasonable.

Technically, the SAT reflects the current expenditures per student in Missouri’s highest-performing districts, referred to in the law as Performance Districts. The thinking is that what these districts spent should be adequate. But what does it take to be a Performance District? The way the law has been interpreted is that Performance Districts are those that receive at least 90 percent of their possible points on their Annual Performance Report (APR) under Missouri’s accountability system.

The accountability system, also known as MSIP 6, gives districts points based on a rubric of items considered important by DESE and the state board of education—although some are only loosely related to performance. The FY 2026 DESE budget request relies on 2022 APR points to calculate the SAT. In 2022, districts could earn up to 52 APR points for attendance, having 8th graders fill out an Individual Career and Academic Plan, administering a Kindergarten Entry Assessment to incoming kindergartners, submitting their required financial reports on time, conducting a Climate and Culture Survey, and submitting a Continuous Improvement Plan. All 29 of the Performance Districts received 52 out of 52 points for these categories.

But let’s take a closer look. Eight of the districts only serve students in kindergarten through 8th grade—they don’t have high schools. These districts had only 114 possible APR points, and 52 of them had nothing to do with student performance.

In two of the Performance Districts, Leopold R-III and Ste. Genevieve, fewer than half of the students tested scored Proficient or higher in English/language arts. In another Performance District, Mansfield R-IV, just 52 percent of high school graduates met any benchmark for being considered college or career ready when they graduated. In Brunswick R-II just 28.6 percent of graduates received an advanced credential prior to graduating, compared to 100 percent of graduates in Jefferson C-123. Are we sure these are the best 29 districts out of more than 500?

Here’s the problem: weak accountability systems don’t hold districts accountable. In the case of Missouri, that consequence bleeds over to funding. More than half of the Performance Districts are very small, with fewer than 300 students in the entire district. Spending tends to be higher in these districts because there are few economies of scale. That higher spending leads to hundreds of more dollars for all 850,000 students in the state when it leads to a budget request to add $300 million in state spending.

So before calling foul on the governor’s budget, let’s make sure that the DESE budget request actually makes sense.

The post Performance Districts and Education Spending appeared first on Show-Me Institute.

This year’s request includes an increase of nearly $350 million for the Foundation Formula, due to an increase in the base amount that the state considers “adequate” to educate a child. This amount had been $6,375 for four years, from FY 2020 through FY 2024. The FY 2025 budget included a request to increase the amount to $7,145, phased in over two years. Why the increase? Well, that’s a bit confusing. Please follow along.

Technically, the amount reflects the current expenditures per student in Missouri’s highest-performing districts, referred to as Performance Districts. The thinking is that what these districts spent should be adequate. But what does it take to be a Performance District?

The way the law has been interpreted is that Performance Districts are those that receive at least 90 percent of possible points on their Annual Performance Report (APR) under Missouri’s accountability system, after removing the outliers at the top and bottom of the list. The accountability system, also known as MSIP 6, gives districts points based on a rubric of items considered important to DESE and the state Board of Education—although some items are only loosely related to performance.

For example, districts can earn up to 52 points for attendance, having 8th graders fill out an Individual Career and Academic Plan, administering a Kindergarten Entry Assessment to incoming kindergartners, submitting their required financial reports on time, conducting a Climate and Culture Survey, and submitting a Continuous Improvement Plan. All 28 of the Performance Districts received 52 out of 52 points in these categories. Eight of the districts had only 114 possible points—so there’s almost half of them.

One of the Performance Districts was Gasconade C-4, a rural K-8 district with just 100 students. Last year, 37 percent of its students performed on grade level in English/language arts (ELA) and 27 percent did so in math—both below statewide averages. Another Performance District, Hudson R-IX, with just 39 students in grades K-8, had only one in four students on grade level in ELA and just three in ten in math. Mind you, this district has fewer than 10 students per grade.

The problem is that weak accountability systems reward weak performance. In the case of Missouri, that consequence bleeds over to funding. More than half of the Performance Districts are very small, with fewer than 300 students in the entire district. Spending tends to be higher in these districts because there are few economies of scale. That higher spending leads to hundreds of more dollars for all 850,000 students in the state and adds up to almost $350 million in state spending.

Are we sure this is the best system we can come up with?

The post What’s So Great about Performance Districts? appeared first on Show-Me Institute.

One such item is DESE requesting a much higher than usual increase in the Foundation Formula. The Foundation Formula is the principal vehicle for distributing state general revenue to school districts in a way that (theoretically) reflects student needs and (theoretically) balances resources between poor and wealthy districts. The total Foundation Formula funding has been creeping up from about $3.4 billion a few years ago to $3.8 billion last year. For the next fiscal year, DESE would like to keep the $3.8 billion and add another $500 million, which is three or four times the typical increase.

Why the big increase? Three years ago, DESE asked for an increase in the base amount per student, in part because enrollment was declining. (For reference, the number of students being funded by this “student-based formula” has decreased by over 20,000 students in the last five years). Apparently, having the formula vary with the number of students is only okay if that number is going up. In fact, the increase in the base amount accounts for over $300 million of the request.

Secondly, a bill was passed last year that made several changes to education programs at the state level. The estimated cost of all of those changes was “up to” $228 million in FY 2026. But that includes changes in a laundry list of budget items—not just the Foundation Formula.

Here are what the fiscal effects directly associated with the Foundation Formula were calculated to be for FY 2026 by the Committee on Legislative Research’s Oversight Division. Just over $1.6 million was estimated for changes to how virtual students are counted. A change in how students are counted—from being based entirely on attendance to being based 90 percent on attendance and 10 percent on enrollment—was expected to cost $41 million in FY 2026. A change to how preschool students are counted is expected to cost an additional $61 million in FY 2026. Finally, incentives that increase the Foundation Formula for districts that keep a five-day school week, instead of switching to a four-day school week, are projected to cost $40 million in FY 2026.

So why is the legislature being asked for an additional $500 million? It seems that DESE will not accept districts receiving less money for fewer students.

The post $10 Billion Is a Lot of Money appeared first on Show-Me Institute.

To be fair, if the House budget becomes law, it will be Missouri’s first budget in more than a decade that is smaller than the previous year’s budget. Not only is the House budget smaller than last year’s, it’s also approximately $2 billion smaller than what Governor Parson recommended for next year, which represents a small step in the right direction.

It should be noted that the budget process will now move to the Missouri Senate—the chamber more accepting of higher spending in recent years. It’s therefore still too early to tell if the state’s streak of record-breaking budgets is coming to an end.

The recent budget negotiations in Jefferson City also served as a reminder of how much things have changed for Missouri financially over the past several years.

• Missouri’s total budget has nearly doubled since Fiscal Year (FY) 2019, growing from a little more than $27 billion to $53 billion this year (FY 2024).
• General Revenues (mostly state income and sales tax collections) have increased by significantly less, going from approximately $10 billion to more than $13 billion over the same period.
• The biggest driver of budget growth has been the temporary influx of federal funds associated with the federal COVID-19 pandemic relief and infrastructure packages.
• The federal share of Missouri’s budget has grown from around 30% to closer to 50%.
• While Missouri (much like the rest of the country) has dealt with record-breaking inflation in recent years, state spending growth has outstripped the increase in prices, and has even grown faster than the state’s population and economy.
• Going into next year, the state will lose access to the billions of temporary federal dollars, all while state general revenues are expected to remain relatively flat or decline.

Keep in mind that the extraordinary state spending growth in recent years occurred even though Missouri’s constitution includes a balanced budget requirement—the requirement does not apply to federal funds.

There are myriad reasons to think the road ahead will be a tough one, and cutting spending will be a mandatory part of the equation. That’s why I’m happy lawmakers in the House took the measures they did to start turning the tide on state spending, even though I wish they’d gone further. I’m also looking forward to the Senate debating its spending plan in the coming weeks, with the hopes that members of the Senate also share the House’s view that spending should be reined in.

But with so many important spending decisions left to be made, and such dark clouds ahead in Missouri’s financial future, state taxpayers should join me in waiting until the budget makes it across the finish line before considering whether to celebrate any savings.

The post Harsh Budgeting Truths appeared first on Show-Me Institute.

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.

The post Missouri Budget: A Primer (Update) appeared first on Show-Me Institute.

Six members of the House recently sent a letter to the governor stating their belief that the bill will violate Missouri’s constitution, specifically the Hancock Amendment. The provision in question limits the amount the general assembly can raise taxes in a given year without first being approved by a public vote. (See here for more information about the amendment).

If signed into law, SB 262 would raise the state’s gas tax by 2.5 cents per gallon for each of the next five years, for a total increase of 12.5 cents by 2027. But there’s a catch: residents can get a refund for the additional gas taxes paid due to this bill. The fiscal note for the bill estimates that once fully implemented in FY 2027, it could exceed the Hancock Amendment cap, which for this year is $111.8 million. Depending on how the bill’s fiscal impact is calculated and the number of refunds claimed, it is possible that in the years prior to 2027, the tax collected could also exceed the Hancock limits.

While there’s certainly more to the story regarding whether the legislature violated the Hancock Amendment, the gas tax bill becoming law certainly opens the door for a variety of questions and potential court challenges. The Hancock concerns are explained in more detail here, but here are a few of the major questions at hand:

• How much revenue will the gas tax hike raise?
• How many Missourians will take advantage of the available refund option?
• How will Hancock Amendment compliance be determined?
• How will the other bills signed into law by Governor Parson impact this calculation?

One way to avoid all this potential mess is to send the gas tax question to voters. In fact, a referendum petition has been filed that would accomplish just this, but it has yet to receive approval for circulation by the secretary of state. If the petition were to succeed, the Hancock Amendment concerns would be avoided because taxes approved by voters are not subject to the amendment.

Missouri may soon be raising the state’s gas tax, but there are a lot of questions to be answered before we know for sure. In the meantime, keep enjoying the second-lowest gas tax in the country.

The post What’s Happening with the Gas Tax? appeared first on Show-Me Institute.

For a household with a $140,000 home and a $15,000 car, the property tax would average an additional $8 in the first year, rising to an [sic] $160 average additional payment in year 20, the final year of the bond program.

The Kansas City Star described the machinations at City Hall thusly:

The council is trying to craft a plan that can win voter approval to borrow $800 million over the next 20 years to address the city’s huge infrastructure needs.

This suggests that what is before voters is a 20-year effort. It isn’t.

The city is suggesting not a single 20-year bond for $800, but a series of twenty 20-year bonds for $40 million each, with the last one being issued in 2036 and paid off over the subsequent 20 years. The first bond would be issued in FY 2017 and the last one in FY2036. Property owners would not finish paying off the final bond until FY 2055.

If City leaders want voter support for a 40-year tax increase, the best way to get it is to make clear to the public exactly what they’re asking for. This is a multi-decade commitment!

The post Bombshell: The GO Bonds Will Last Until 2055 appeared first on Show-Me Institute.

Compared to last year, the state is set to spend almost a billion dollars more. For those who like these things broken down (as the Spend-o-meter does), that amounts to nearly $30 more every second ($766.53 per second in FY 13 vs. $796.40 per second in FY 2014). A huge chunk (nearly 40 percent) of that comes from increased spending on Medicaid. Medicaid has continued to take up a larger share of the state budget. Just 10 years ago, Medicaid took up a little more than 29 percent of the budget; now, it is more than 36 percent. And this is a program that the governor wants to expand.

Other Show-Me oldies are in the new budget. The Wine & Grape Board gets a cool $1.8 million. Biodiesel incentives are still seeing a nice $5.5 million, and the Missouri Agricultural and Small Business Development Authority gets $130,000. Eliminating these won’t lead to a massive windfall, but every little bit helps.

The goal of the Spend-o-Meter is to help break down state spending in order to make it more comprehensible. When people realize that the state is spending close to $800 a second, it could put things into perspective and hopefully make taxpayers care about how the state is spending their money.

The post The Show-Me Spend-O-Meter For A New Year appeared first on Show-Me Institute.

The post Missouri Tax Credit Estimates FY 2012 and FY 2013 appeared first on Show-Me Institute.

If approved by the General Assembly, the added funding for the Fiscal Year that begins July 1st would expand the program to an additional 1225 women next year. Women who are eligible for this program must meet specific residency, age, and income guidelines.

The current income limits by household size are here. The current limits are already very generous–women can qualify for this program even if their kids aren’t eligible for the Free and Reduced Lunch Program.

Most of the controversy over Governor Blunt’s proposal focuses on the politics of which clinics should provide the services. We should instead consider whether these services are the best target for public health spending. Mammograms are very inexpensive–usually only about $100–so they cost less than many other medical tests and treatments, such as twice-a-year dental cleaning. And mammograms are not equally important for all women, because genetic and lifestyle factors make some women more at risk for breast cancer than others.

A better way to improve the state’s health care programs would be to issue vouchers that poor families can spend on whatever services they need most. We should make state health care programs more flexible, rather than pay for a few specific services that most people can afford already.

The post Show Me Healthy Women Needs Flexibility More Than Funds appeared first on Show-Me Institute.