Susan Pendergrass is joined by Elias Tsapelas, director of state budget and fiscal policy at the Show-Me Institute, to break down the sweeping new federal legislation known as the “One Big Beautiful Bill.” They discuss what it really means for Medicaid recipients, food stamp programs, state budgets, and Missouri taxpayers.

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Timestamps

00:00 Understanding the One Big Beautiful Bill Act
06:44 Medicaid: Changes and Implications
11:23 SNAP Benefits: New Regulations and Effects
14:18 Tax Implications for Missourians
19:09 Future of Medicaid and State Budgets

Episode Transcript: Understanding the One Big Beautiful Bill with Elias Tsapelas (Download Here) 

Susan Pendergrass (00:00)
Okay, here we go. You ready? Elias Tsapelas, we are going to talk about IT—the big IT—the One Big Beautiful Bill Act. I don’t feel like I understand it. I suspect there’s a lot of people reading the news that don’t understand it, but you seem to understand a lot of it. So thanks for coming to talk to us about it today.

Elias Tsapelas (00:19)
No problem. I think there’s a lot of misconceptions, especially about what’s happening with the welfare programs in the bill. So I’m happy to dive into those.

Susan Pendergrass (00:27)
Yes, yeah. I’ve definitely seen claims that this is going to basically strip health care from millions and millions of people and that kids will be hungry. And I don’t want to minimize that. But we had Brian Blase on the podcast, and I thought I had an understanding of it that didn’t exactly line up with that narrative. So let’s just start there. People are saying that tens of millions of people are going to lose health insurance under the One Big Beautiful Bill Act. Explain that to me.

Elias Tsapelas (01:01)
Well, the first thing people need to understand about Medicaid is that it’s gotten tremendously more expensive in recent years. The Biden administration made a lot of changes during COVID—changes to how the program works and its future trajectory. Even after the One Big Beautiful Bill goes into effect, we’re basically just putting the program’s costs back on the trajectory it was on in 2021. This isn’t going back to the Stone Age—it’s more like going back five years.

A lot of this stems from efforts to eliminate waste, fraud, and abuse. And while there’s certainly some of that, what many people don’t realize is that most states, including Missouri, now contract with private health plans to cover people on Medicaid—particularly the Medicaid expansion population, which consists of healthy adults.

Susan Pendergrass (02:11)
Okay, so let’s just pretend we know nothing. Medicaid is a program that covers health insurance costs for low-income and disabled individuals?

Elias Tsapelas (02:24)
Yes. About 50% of kids in Missouri are on Medicaid. The program covers around two-thirds of all nursing home costs and over a third of all births in the state.

Susan Pendergrass (02:34)
So low-income pregnant women can get Medicaid coverage, and their children can as well. Who exactly is in the “expansion population”?

Elias Tsapelas (02:47)
Good question. And just to clarify—yes, Medicaid also covers a lot of very disabled individuals who private health insurance wouldn’t. But the expansion population refers to healthy adults making up to 138% of the federal poverty limit. These are not permanently disabled people. They’re generally able to work.

Before 2021, someone like me—unmarried and childless—couldn’t qualify for Medicaid in Missouri, even if I lost my job. Medicaid expansion changed that, and with it came a lot of problematic incentives. One issue is that states are paying health plans monthly for enrollees, but there isn’t always a process to verify whether those people are still eligible.

Susan Pendergrass (04:53)
Let me just stop you there. So the state is paying monthly premiums for people who might not even know they’re on Medicaid? And they might have a job now and no longer qualify, but the state hasn’t gone back to check?

Elias Tsapelas (05:40)
Exactly. Ideally, people would notify the government when they get a job, but most don’t, and the IT systems don’t really catch that. Previously, states just paid the bills as they came in. If someone didn’t go to the doctor, there was no cost. Now we’re paying premiums whether they use care or not, which adds up quickly.

Susan Pendergrass (06:40)
So what’s in the One Big Beautiful Bill? Are states required to recertify people?

Elias Tsapelas (06:45)
Yes. One big provision is that states must check eligibility at least twice per year. The Congressional Budget Office projects significant enrollment losses just from checking more often. That’s raised concerns about red tape, but the goal is to ensure people who are no longer eligible aren’t still receiving coverage.

Susan Pendergrass (07:13)
Can Missouri do that? Do we have the systems in place?

Elias Tsapelas (07:20)
I’d like to think so, but I’m not sure. During COVID, states weren’t allowed to check eligibility at all for over three years. Missouri spent an entire year catching up when that ended. Right now, about 1.2 million people are on Medicaid in Missouri, including 350,000 in the expansion group. So yes, it would mean more IT strain.

Another major part of the bill is requiring “community engagement” or work requirements for the able-bodied expansion group.

Susan Pendergrass (08:24)
So that’s people under 65 who aren’t disabled? How do they know who’s supposed to work?

Elias Tsapelas (08:32)
There are carve-outs—new moms, parents with kids under 14, people over 65, etc. The idea is to target people who could be in the workforce. There are also alternative ways to meet the requirements, like volunteering. And it’s worth noting: the SNAP program (food stamps) has had work requirements since the 1990s.

Susan Pendergrass (10:25)
Then why are people saying this will “kick people off”?

Elias Tsapelas (10:33)
Because people will have to meet work or volunteer requirements, and the state will recertify them more often. The question is: how many people will get caught in red tape? That depends on how well states implement the changes. Most of the bill’s provisions are phased in over time to allow states to adapt.

Susan Pendergrass (11:34)
Let’s talk about SNAP benefits. People are saying this will take food away from families. What’s actually changing?

Elias Tsapelas (11:46)
The federal government will now penalize states with high error rates in SNAP administration. Missouri’s overpayment error rate is about 10%, and some states are worse—Alaska’s is nearly 25%. Under the bill, if your error rate is over 6% for two years, the state will have to start covering some of the cost. So Missouri may have to pay a portion of benefits if it doesn’t improve.

Susan Pendergrass (14:06)
How does the bill impact taxes for Missourians?

Elias Tsapelas (14:14)
The standard deduction is going up—by $750 for single filers and up to $6,000 more for seniors. There’s also a new deduction for car loan interest and temporary exemptions for taxes on tips and overtime. Since Missouri’s tax code follows the federal code, that could mean less state revenue, too.

Susan Pendergrass (15:41)
So what will this cost Missouri?

Elias Tsapelas (15:46)
It depends. If we reduce our SNAP error rate, the cost isn’t too bad. But a bigger issue is the provider tax cap dropping from 6% to 3.5% over a few years. Missouri is at 4.2% now, so we’ll need to lower it. That tax generates about $1.5 billion per year for hospitals.

Susan Pendergrass (17:09)
How does the rural hospital fund come into play?

Elias Tsapelas (17:24)
The bill creates a $50 billion Rural Hospital Fund to be distributed over five years. States will get a portion based on how rural they are. The hope is this fund offsets the provider tax losses—at least through 2030. But after that, the fund ends. So there’s concern about what happens long-term.

Susan Pendergrass (19:18)
Senator Josh Hawley mentioned he supports the bill but hopes to fix the provider tax issue in five years.

Elias Tsapelas (19:29)
That seems to be the thinking—pass it now and revisit the unpopular parts later. A lot of the tax and spending changes are temporary, which is partly how they got the bill to comply with budget rules.

Susan Pendergrass (20:30)
This reflects what voters asked for—smaller government and more state responsibility. It reminds me of the Department of Education cuts. Missouri will have to decide which programs to keep and how to fund them. But I was surprised the expansion of the MOScholars tax credit program made it in.

Elias Tsapelas (22:35)
Yes, Medicaid will continue to dominate the state budget if we don’t address it. Every year it’s, “How much more is Medicaid going to cost?” Then we build the rest of the budget around that. This bill will force Missouri lawmakers to reevaluate some of those assumptions and perhaps reconsider whether managed care is working.

Susan Pendergrass (25:02)
That’s going to be interesting to watch. Thanks for breaking it down, Elias. This bill is being talked about a lot, but I think a lot of people are still unsure what it really does.

Elias Tsapelas (25:16)
No problem. I think we’re all looking forward to seeing what happens next.

Produced by Show-Me Opportunity

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The post The Final Weeks of the 2025 Session 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.

Kehoe committed to reducing Missouri’s income tax, which is welcome. Missouri needs to be more competitive with the states around us who are also working to attract families and businesses—including those already living and working in Missouri.

But he also introduced a budget larger than previous years, and detailed a number of places where he wanted to increase spending. Those increases included a number of items regarding public safety, such as $10 million for the Blue Shield Program, $2.5 million to support the sheriff’s retirement system, a new crime lab in Cape Girardeau, and boosting spending on the Blue Scholarship Program for law enforcement basic training.

Kehoe indicated he wanted $10 million to support childcare providers, $15 million in additional funding for career and technical centers in addition to $5 million more on an annual basis for their operational costs, $800,000 in funding for Future Farmers of America, and $55 million in new bonding for state fair facilities.

Regarding education, Kehoe indicated he wanted to spend $200 million more for the education foundation formula, $370 million to fully fund school transportation, $33 million for teachers’ salaries, and $30 million in grants for rural schools.

He also asked for an additional $10 million to be spent to support Veterans Homes.

The tab comes to $53.4 billion, $450 million more than the previous year. He did not mention any cuts to spending. But he did commit to ending the state’s income tax, “once and for all.”

All the programs the governor wants to support may be good and worthwhile. But it doesn’t take an experienced budget analyst to see the problem: one cannot continually increase spending while promising to zero-out an income stream that accounts for almost 60 percent of the state’s general revenue according to the state’s Office of Administration (see page 25).

Missouri’s financial position is all the more difficult because Kehoe’s predecessor, Mike Parson, spent money like a blue state progressive.

Reducing Missouri’s income tax to zero is necessary because of the economic benefits that will accrue. But if the effort is to be successful, Missouri needs to reduce spending. A lot.

I do not envy the incoming governor and those tasked with cutting spending—but there is no other way forward.

The post Missouri’s Tough Road Ahead appeared first on Show-Me Institute.

Elections and inaugurations are a time for reflection and a recommitment to principles. As Missouri prepares for the new administration of Mike Kehoe, it’s worthwhile to consider the performance of his predecessors—especially on issues relating to fiscal management of taxpayer resources.

The Cato Institute, a libertarian-minded think tank based in Washington, DC, rates the fiscal performance of governors. The good news is that Governor Mike Parson is not the worst governor in the United States, but he’s the worst one who claims to care about limited government.

Cato has issued its report every two years since 1992. The report methodology, available online here, issues a letter grade based on each governor’s success at restraining spending and tax increases. Parson earned a D grade in 2024. Author Chris Edwards wrote, “Parson has been a tax reformer, but he has dropped the ball on spending control. The general fund budget has jumped from $10.5 billion in 2022 to an expected $15.6 billion in 2025, a 49 percent increase in just three years.”

The D grade placed Parson 40th of the 48 governors rated. Florida governor Ron DeSantis was ranked 19th and Virginia Governor Glenn Youngkin came in 15th. Parson was closer to Minnesota governor and recent vice-presidential caudate Tim Walz, who came in last. Of Missouri’s neighbors, governors of Iowa, Nebraska, and Arkansas each earned an A grade, ranking 1st, 2nd and 4th respectively. Even Illinois governor J.B. Pritzker and California’s Gavin Newsom outperformed Parson, placing 32nd and 35th respectively.

If one uses Republican party identification to denote a preference for small government and low taxes—and that is arguable these days—Parson’s 40th-place ranking stands out even more. It made him the worst-scoring Republican in the nation. And 2024’s score is not a fluke; Parson scored a D in 2022 and a C in 2020.

Parson doesn’t just compare poorly to other current governors; he scored poorly compared to past Missouri governors. Parson’s letter grades surpass only those of Mel Carnahan (scoring D, D and F) and Robert Holden (F). Parson even seems to score worse than Jay Nixon, whose scores were B, C, D, and D. (If you’re wondering, Matt Blunt was the best scoring governor since 1992, earning Missouri’s only A in 2006 and a B in 2008.)

Note that the report’s methodology changed for the 2008 report but has remained the same since. Previous iterations relied on many more variables, but the outcomes are unlikely to have been much different.

Missouri’s total spending has practically doubled in the last five years, including not just the general fund, but other dedicated state funds and federal money. That total spending jumped from $27 billion in 2019 after Parson’s first year in office to a little more than $50 billion for 2025. It now costs three times as much to run Missouri as it did in the Carnahan and Holden administrations!

Parson’s profligacy stems from the decisions he’s made since the federal government’s COVID relief funds flooded Missouri’s budget with billions of dollars in one-time cash. States were given considerable discretion on how to use much of the relief funding, not to mention the state tax dollars the federal cash freed up for other uses. Unfortunately, Parson, with the help of Missouri’s General Assembly, fell victim to the allure of so-called free money.

Today, Missouri’s budget is littered with what were once temporary initiatives that never ended and now receive permanent funding. Or, perhaps worse, formerly federal obligations that are now borne by state taxpayers.

Key among these includes Parson’s decision to use state funds to maintain the higher childcare subsidies the federal government subsidized during the COVID pandemic, now costing state taxpayers at least $70 million annually. Parson also failed to meaningfully manage Medicaid spending. Missouri’s lackadaisical approach to checking program recipient eligibility, after the federal government lifted its COVID-era ban on the practice, has likely cost taxpayers hundreds of millions of dollars thus far.

In addition, Parson increased state employee pay by 7.5% plus an additional 3.2% cost of living increase last year. These raises were paid for with a temporary influx of state funds, but because the increased pay was not made commensurate with employee reductions, the higher salaries will require new permanent funding sources and will increase the obligations of the already underfunded state pension system.

Governor-elect Kehoe has a difficult job ahead of him administering government and working to attract more families and employers to the Show-Me State. Unfortunately, his predecessor has done him—and the people of Missouri—a great disservice by failing to properly manage taxpayer funds.

The post Missouri Must Do Better at Controlling Spending 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.

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David Stokes, Elias Tsapelas, and Avery Frank join Zach Lawhorn to discuss:

– The state budget

– The final week of the legislative session

– The latest plan in the City of St. Louis to deal with the prevalence of temporary tags, and more

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Produced by Show-Me Opportunity

The post The Final Week of the Session appeared first on Show-Me Institute.

For years now, I have written about how Missouri’s spending habits will eventually prove unsustainable. As a quick reminder, Missouri has set a new record for the largest budget in state history in each of the past thirteen years. Between fiscal years 2019 and 2023 alone, the state’s total budget nearly doubled, and spending of state income and sales tax dollars grew by more than 42%. In other words, this isn’t a trend that can be explained away as solely a federally fueled phenomenon.

Of course, it is true that over the past few years Missouri has received an enormous influx of federal funds as part of the response to COVID-19 and the large infrastructure bill. But as it always does, the federal government will soon begin winding down its state aid, leaving Missouri’s lawmakers with the difficult task of deciding how to fill the holes that their federal counterparts left behind.

As I explained in my report last year, Saving Federalism¸ government spending typically only grows, and lawmakers in Washington, D.C. are a major reason why this is the case. The most common way the feds have kept perpetually growing spending has been through increased financial support during times of emergency.

During the 2008 recession, and again in recent years, the federal government has offered states generous funding to keep their budgets afloat and help them avoid the need for any service cuts. But at the same time, federal officials create or expand government programs that they have no intention of funding at the same level going forward, knowing full well how difficult it will be for states to pick up more of the bill or scale back the program once the emergency is over. This is exactly what Missouri’s government will begin experiencing in 2024.

As next year’s budget requests for the state’s executive departments show, state taxpayers will need to chip in hundreds of millions of additional dollars to continue funding the services expanded by the federal government’s initiatives. Two of the most expensive examples include further extending Medicaid coverage to individuals who likely don’t qualify for the program, and continuing rate increases with state taxpayer dollars for federally subsidized child care that go beyond what the federal government will cover. To be clear, these are dollars that would otherwise be used to fund Missouri’s—not Washington, D.C.’s—spending priorities.

Making matters worse is that reports indicate that state tax collections are down compared to last year, meaning that Missourians can less afford this added expense than in years past. Going into the 2024 legislative session, it’s clear that reining in the budget should be one of our lawmaker’s top priorities. The first step should be rejecting funding for any effort to make temporary federal programs permanent.

The post Growing, Growing, Gone appeared first on Show-Me Institute.

In August, Missouri voters approved Medicaid expansion through a constitutional amendment. Recently, Missouri’s legislature passed next year’s budget sans funding for Medicaid expansion. As I wrote more than a month ago, the state’s general assembly had real reasons for deciding against funding expansion. Medicaid expansion represents a significant growth in future spending obligations for the state’s budget. Despite claims to the contrary, expansion was set to cost more than $1.5 billion next year, with approximately $100 million coming from state sales and income taxes that would normally go toward other programs.

Missouri’s constitution gives the legislature the sole responsibility of authorizing state spending. Further, it states that constitutional amendments cannot impose new costs without outlining how that cost would be paid for. Since the amendment approved by voters last August has proven to have an enormous price tag, and included no funding mechanism, the legislature decided not funding expansion was a constitutionally valid option.

After the budget was approved, several legislators noted the constitutional amendment still requires eligibility guidelines to be expanded on July 1st, regardless of whether there is funding to cover the cost. Recently, the state’s Medicaid agency began laying the regulatory groundwork for eligibility expansion. But last Thursday, Governor Parson tore up that groundwork and withdrew the proposed changes that would expand eligibility on July 1st. In the statement announcing withdrawal, the governor’s cited reason was the lack of budgeted funding.

Heading into the new state fiscal year, there’s only one thing about Medicaid expansion that’s certain: it will not be happening in Missouri on July 1st. Expansion advocates aren’t going to just sit back and let this go, which is why a legal challenge appears imminent. It’s likely the next step is for someone to be denied coverage who would have qualified under the approved constitutional amendment after July 1st, which will prompt a lawsuit and send the issue to the courts. Judges will have to decide not only whether an amendment can compel the legislature to appropriate funds, but also if eligibility must be expanded absent any funding.

It’s important Missourians take notice of how this situation plays out over the next few months because it could significantly impact the future of our state. Potential judicial action could affect the state’s initiative petition process, the health coverage status for thousands of Missourians, and the allocation of billions in future state revenue.

The post Is Medicaid Expansion Going to Court? appeared first on Show-Me Institute.

When Missourians voted on Medicaid expansion this past August, they were told the initiative would save the state billions of dollars. I wrote repeatedly at the time about how wrong those estimates would prove to be; expansion was then approved by a narrow margin.

With Medicaid expansion set to go into effect in a few months and Missouri’s Legislature now putting together next year’s budget, the true price tag for Medicaid expansion has finally come into focus. The state’s most recent estimates suggest that the first year will require more than $1.5 billion in new spending, which includes a significant portion of federal funding and a state share of approximately $100 million. Where will the legislature find these funds? Instead of searching for the money elsewhere in the budget, the House Budget Committee is questioning whether they need to fund expansion at all.

Of course, Missouri voters did approve the petition to expand Medicaid eligibility, but the issue is whether the constitutional amendment requires the legislature to come up with the funds. Our state’s constitution, like the U.S. Constitution, gives the legislature the “power of the purse”—the responsibility of authorizing all state spending. The constitution also provides that amendments cannot impose a new cost without outlining how that cost would be paid for. Unfortunately, the Medicaid expansion amendment, which will have an enormous cost, included no such funding mechanism.

The House Budget Committee’s stance is that without such a mechanism, the legislature is under no obligation to include funding for Medicaid expansion in next year’s budget. The committee’s move is just the first step of many if the legislature wants to avoid appropriating the funds necessary for expansion. But if the eventual budget does not include funding for expansion, the issue would probably be challenged in court.

While discussions on this topic are just beginning and will likely continue for the remainder of this legislative session, it’s important to recognize what’s happening here. There are legitimate constitutional questions being asked here, and despite what you may hear, this is about more than simply the politics of Medicaid expansion.

The post Medicaid Expansion Brings Missouri to a Constitutional Crossroads appeared first on Show-Me Institute.

Last week, as the state legislature began working on next year’s budget, the topic of paying for Medicaid took center stage. As I’ve outlined repeatedly, the cost of Medicaid in Missouri has been growing for years, but next year’s estimates indicate the program’s spending will go to another level.

Here is a look at the last four years of Missouri’s Medicaid spending with the governor’s newly released estimates included:

As you can see, the program is expected to be almost 36 percent more expensive than it was just three years ago. If you look at state general revenue (GR) spending (where our state income and sales taxes go), the story isn’t much better. The general revenue cost of the program is estimated to be more than $520 million higher than it was in 2019 (a nearly 24 percent increase), which is far greater than state tax revenues have grown over that same period. See the table below:

This is important because GR spending is what many other state programs such as K–12 education rely on. If the revenue and expenditure estimates for next year are accurate, it will mean that Medicaid consumed all the state’s revenue growth from the last 4 years AND siphoned more than $300 million from other state programs.

As seen in the table above, revenue is projected to only grow by about $217 million between 2019 and 2022; meanwhile, Medicaid spending is projected to grow by $520 over the same period. The table below shows the additional projected cost of Medicaid expansion, which accounts for a significant portion of the program’s expected cost growth and includes both state and federal spending:

In the first year alone, while expansion enrollment is still ramping up, the policy will cost upwards of $2 billion in total. Before voters approved the initiative, many supporters argued that expansion would be “costless” or “pay for itself,” but these claims never held water. In fact, the savings that we were told would cover the cost of expansion are expected to amount to less than $13 million, which is less than 1 percent of the program’s estimated cost in the first year.

As Missouri’s legislature prepares next year’s budget in the coming months, taking concrete steps to rein in Medicaid spending has never been more important. With the cost of Medicaid expansion looming and the revenue uncertainty of the COVID-19 pandemic ongoing, state taxpayers can no longer afford the price of inaction.

The post Governor Highlights Medicaid Expansion’s Extraordinary Cost appeared first on Show-Me Institute.

Of course, our state is in the middle of an unprecedented pandemic, which has been especially hard on low-income Missourians. But the LIHTC program does nothing to make housing more affordable for those who need a place to live right now. Assuming the MHDC starts awarding tax credits this year, the subsidized housing will still need to be built before it can provide any additional relief for Missourians.

Research has shown that, even in normal economic times, LIHTC is not effective at making housing more affordable. Not only does less than fifty cents of each dollar in tax credits go toward the construction of affordable housing, Missouri’s program also doesn’t increase the supply of affordable housing. For years, Missouri had one of the most generous state LIHTC programs in the country, matching each federal dollar on a one-to-one basis. Yet, in the years after the state match was halted, the number of affordable housing projects across the state remained largely unchanged.

Missouri’s state government is also struggling to deal with the pandemic and facing a serious budget crunch. To keep the budget balanced, the governor has already restricted more than $400 million in state spending. This means that there will be hundreds of millions less in funding this year for things such as education and public safety. And the outlook for next year’s budget isn’t any better.

There’s no doubt that many Missourians are facing housing issues during this unprecedented time. But if our elected officials’ goal is to address this problem, shouldn’t they be searching for a solution that is going to help people now instead of reviving a costly and ineffective program?

The post The LIHTC Program Is Back Again appeared first on Show-Me Institute.

So far, public education has been held basically harmless. Regardless of how or where they’re delivering education, school districts can use attendance numbers from either last year or the year before to calculate their state aid. But that won’t matter if there is less money to distribute. There aren’t many places to cut state spending other than public education. Teachers probably won’t get raises and class sizes will increase. There is likely to be an outcry.

One area where there could be a little give is reconsidering the concept of local control. Missouri has 520 public school districts. The average Missouri school district has just over 400 students. That’s a school, not a district. We have 64 districts that had 50 or fewer students in 2018–19. I know that communities feel strongly about their Eagles or their Tigers, but it’s really expensive to have so many separate bureaucracies.

According to the fiscal survey administered by the U.S. Department of Education every year, Missouri had over $360 million dollars in general administration spending in 2016–17 (latest year available). This includes expenditures for board of education and executive administration services and other school district administrative functions. At roughly $400 per student, Missouri is ranked 12th from the top when it comes to general administrative spending.

About half of Missouri’s general administrative spending was for salaries and the other half for benefits. Indeed, the Missouri Department of Elementary and Secondary Education (DESE) reported that in 2018–19, there were 281 district superintendents with salaries (before benefits) over $100,000 and 38 that were over $200,000.

This year, many Missouri students are learning from home in microschools or pandemic pods. Parents are picking up the cost of supplies and even paying tutors to manage online schooling. I think it’s time to start asking if we need to continue to spend over one-third of a billion dollars on bureaucracy, or if it’s time to rethink how we fund public education?

The post It’s Time to Rethink How We Fund Public Education appeared first on Show-Me Institute.

What should Missouri’s version of expansion look like? States across the country have been given flexibility in implementing Medicaid expansion, and Missouri should take advantage of this. Seeking the appropriate federal waivers to tailor expansion coverage in such a way that it best meets the needs of Missouri’s recipients, while also protecting state taxpayers, should be a top priority.

What needs to happen prior to July 1, 2021? Expanding Medicaid will likely require significant changes to the current program. First, the state’s Medicaid agency will surely need additional resources to handle the extraordinary influx of new enrollees. At a minimum, this would include computer system upgrades and increased staff. In addition, state laws and regulations will need to be updated to accommodate the new expansion population.

What is the plan for covering the costs? One of the biggest concerns with Medicaid expansion is the cost and corresponding impact on the state’s budget. Policymakers will need to decide how to pay for the already skyrocketing costs of the current Medicaid program, while also figuring out how to budget for the potentially hundreds of thousands of new recipients. In such uncertain budgetary times, how Medicaid is funded could have significant impacts on other state funding priorities.

How will accountability be encouraged? Medicaid expansion will grow Missouri’s budget by billions of dollars over the next few years. It will be more important than ever that state taxpayers know how their money is being spent. Before the expansion proposal is implemented, policymakers should establish accountability metrics to help ensure each tax dollar is being put to good use.

Voters may seem to have the final say on a matter, but the passage of Medicaid expansion means we’re now entering the more complicated process of actually implementing the policy. Over the next ten months, our elected officials should carefully weigh every available option, because the decisions made will surely impact Missourians for years to come.

The post What to Expect When You’re Expanding appeared first on Show-Me Institute.

On August 4, Missouri voters will decide whether the state should become the 38th to expand Medicaid. Proponents of the measure suggest expanding the program would “save” the state money, but a closer analysis suggests the opposite is true: Not only will the program cost the state money, but it will come at the expense of other important budget priorities.

How do proponents create the illusion of savings? Let’s take a look at the numbers.

Today, Missouri’s Medicaid program covers nearly 940,000 people and costs around $11 billion per year. The federal government pays about two dollars for every dollar the state spends, yet the program still consumes nearly 40% of the state’s budget.

If Medicaid were expanded, Missouri’s Department of Social Services projects that more than 285,000 able-bodied adults would enter the program within the first year at a cost of around $2.7 billion. For these new recipients, the federal government’s match would be more generous, at $9 for every dollar Missouri spends instead of the usual $2. But even at that higher match rate, Missouri’s share of the expansion cost would be significant.

To find “savings,” then, expansion advocates rely on several dubious assumptions.

First, federal funding for Medicaid is treated as “free money.” Although Missouri taxpayers are also federal taxpayers, the cost to the federal government is discounted in the “savings” analysis. And with the federal government in a period of historic deficit spending, new Medicaid spending will be debt for our kids and grandkids to pay off.

Second, proponents’ models assume an increase in expansion enrollment that is much lower than what Missouri’s own Medicaid agency expects. We don’t have to look far to see states that have been burned by their pre-expansion estimates of enrollment and associated costs. Illinois, Arkansas, and Louisiana saw initial expansion enrollment dramatically exceed their estimates. If Missouri sees enrollment slightly above the current estimates from the state’s Medicaid agency, the savings vanish even in the pro-expansion models.

Third, advocates forecast the cost for each new enrollee to be less than similar individuals who are already enrolled in the state’s Medicaid program. By underestimating the cost per beneficiary, expansion supporters shave even more costs from their estimates—even though the state knows they’ll cost more.

And fourth, the most dubious of all, expansion advocates assume the number of disabled Missourians on the program will drop by more than 20 percent over the next four years. By enrolling more individuals under the expansion guidelines (where the federal government pays a higher share), supporters assume they can shift some of the state’s existing Medicaid costs to the federal government. The problem is, this type of maneuver is not allowed. Missouri cannot enroll people who are already eligible for Medicaid into the expansion population, so the idea that the number of disabled Missourians in the program could drop by more than 20 percent is simply unrealistic.

We should also keep in mind that when supporters of the proposal say Medicaid Expansion will save Missourians money, they don’t literally mean the program will cost less. The cost of the program grows year after year, even now. What supporters are saying is that they think it will be less expensive to the state than if the state didn’t expand at all.

There are other important unknowns that must be taken into account, including the risk that taking more federal dollars today may put our state in an even worse budgetary bind tomorrow. For instance, if the federal government finally decides to rein in the deficit by reducing its match on the Medicaid expansion population, state taxpayers may be left holding the bag.

Balancing Missouri’s budget around Medicaid is already an incredibly difficult task, especially amidst an economic downturn. Balancing the budget after expansion would be even more painful, because state legislators will have to come up with hundreds of millions of dollars annually to address both traditional Medicaid and the expansion’s costs. These tough decisions are sure to put priorities like education, roads, and public safety funding at serious risk. Suggesting that the state could save money by spending more on Medicaid was always a dubious proposition, but at some point forecasting gimmicks have to give way to common sense.

The post Debunking the Myth of a Costless Medicaid Expansion appeared first on Show-Me Institute.

Nearly five months ago, I wrote about my concerns with the widely cited Washington University expansion model. Last week during testimony before the committee, the Missouri Department of Social Services (DSS) confirmed that my concerns were valid. DSS officials explained in no uncertain terms that it would be illegal to enroll disabled Missourians into the Medicaid expansion population. This means that currently disabled Missourians would only be eligible for the current lower matching rate for federal funds, instead of the much more generous matching federal rate for the expansion population. And as I outlined in February, without that assumption, there’s a billion-dollar hole in the Washington University model’s cost estimates.

DSS also released its own estimates for the budgetary impact of Medicaid expansion. The projections are based on Missouri’s current Medicaid costs, its economic conditions, and what is known about the state’s low-income population, and they show that expansion will cost more than $2.7 billion in total each year. The federal government will pay the majority of that $2.7 billion, but state taxpayers still pay federal taxes. In state general revenue spending, DSS estimates it will cost more than $167 million per year, which will amount to more than $870 million in state income and sales tax dollars between 2022 and 2026.

These estimates are a far cry from “savings,” which is especially important because these costs will come on top of the current Medicaid program’s growth. It is also important to understand why the Washington University expansion model varied so significantly from our own state Medicaid agency’s predictions. In the end, it comes down to a series of faulty assumptions.

Not only were the authors of the model wrong about what could be done with Missouri’s disabled population, but they also vastly underestimated the number of Missourians that would enroll in expansion and the associated cost of their care. Instead of roughly 230,000 newly eligible adults enrolling, DSS suggests the total will be closer to 286,000. And the monthly cost of each new enrollee will be more than $730 per month, as opposed to the Washington University assumption of $425.

With updated DSS numbers and corrected assumptions about disabled enrollment, the WashU model’s conclusion of a financial boon for Missouri is unattainable. Based on this new information, and given the severity of our state’s current economic downturn, it’s time to stop pretending Medicaid expansion will not break Missouri’s budget.

The post Missouri Medicaid Division Confirms Expansion Will Break Budget appeared first on Show-Me Institute.

Assuming Missouri’s spending trajectory doesn’t change (a very conservative estimate given the current pandemic), here is a look at the tough road ahead for Missouri’s budget, with and without Medicaid expansion.

This is where Missouri’s tax dollars are being spent this year:

And here is a simple estimate of Missouri taxpayer spending on Medicaid over the next five years:

Note: These estimates use a yearly cost inflation factor of 5 percent based off the previous year’s growth. Expansion spending will likely be higher, but for simplicity, the estimate includes new enrollment of 230,000 Missourians with the state picking up 10 percent of their health care costs. The expansion spending also includes a “woodwork effect” of 50,000 new enrollees for which the state would pay the traditional 35 percent.

The table shows that Missouri’s tax revenue collections would have to increase by more than $730 million by 2024 just to cover conservative cost estimates for Medicaid expansion. Simply covering the costs means that no new funds will be available for other state programs over the same period. And any shortfalls will have to be paid for with tax increases or cuts to current programs.

It is important to note that achieving the revenue growth required to avoid these outcomes is certainly not a given. Just last year, state revenue collections increased by $98 million in total, but this year revenue collections are expected to decrease by approximately $600 million.

So, where will the money for Medicaid come from if not from increased taxes or revenue growth? Since nearly 45% percent of all general revenue spending goes toward education, it’s likely the funds will come at the expense of public schools and other state priorities. Here are a few examples illustrating the scale of Medicaid’s cost growth, and how those funds might otherwise be spent.

$730 million translates to:

– $3,500 for each child in poverty receiving a public K-12 education or

– $10,400 for every person in poverty attending a public higher education institution or

– 4,700 miles of interstate highways could be resurfaced or

– More than double the state investment in public safety measures for each of the next four years

Every year that Medicaid’s costs remain unchecked, other funding priorities will suffer. Given the current revenue shortfall, balancing the budget over the next few years is likely going to be a difficult task. Before expanding government programs, voters and policymakers should be aware of the costs and trade-offs expansion would bring.

The post Harsh Trade-offs with Medicaid Expansion appeared first on Show-Me Institute.

In 2018, Missouri lost out on nearly $600 million dollars in state revenues due to its numerous tax credit programs. The worst offender was the Low-Income Housing Tax Credit (LIHTC). As I’ve written before, LIHTC has been a historically bad investment for Missouri taxpayers. Not only does less than half of LIHTC spending go toward building affordable housing, Missouri’s program doesn’t even increase the supply of available housing for low-income residents.

Missouri stopped matching federal LIHTCs after 2017, yet developers are still building affordable housing in Missouri. In the two following years, data from the Missouri Housing Development Commission show the number of affordable housing projects has remained largely unchanged. In other words, housing developers have found ways to build the same amount of housing units with half (Missouri previously matched federal LIHTCs on a one to one basis) the government investment. Despite the many claims that Missouri’s portion of the program was necessary to spur investment, our state’s experience is now the perfect example of how one-size-fits-all economic development policy fails to deliver.

Lessons from Missouri’s LIHTC program should also guide our policymaker’s tough budgetary decisions going forward. Scaling back or ending many of Missouri’s tax credit programs won’t necessarily be easy, and it won’t completely fix the state’s ongoing revenue problems, but it’s the right decision for state taxpayers. Many Missourians are currently finding ways to get by with less, and it’s only reasonable to expect their government to do the same. By leaving LIHTC dormant and reforming Missouri’s tax credit programs today, policymakers can improve our state’s financial outlook for years to come.

The post Missouri Needs Tax Credit Reform Now More than Ever appeared first on Show-Me Institute.

Growing concern about the spread of the coronavirus has led multiple localities to institute stay-at-home orders and order many businesses to close. We are now starting to see the impact of statewide efforts to practice social distancing on Missouri’s economy. As the number of unemployed or laid off Missourians continue to rise, it’s fair to also worry about how drastically these workforce changes will negatively impact both state and local tax revenues for the coming year. Keeping Missouri’s budget balanced, as is required by the state’s constitution, will require cuts in funding to many state programs when income and sales tax revenues come in much lower than expected.

Missourians bracing for at least another month at home should also prepare for an economic landscape that looks different going forward, because the resulting constraint on economic activity will have significant consequences.

The post Missouri Descends into Economic Downturn as Jobless Claims Soar appeared first on Show-Me Institute.