David Stokes, Elias Tsapelas, and Avery Frank join Zach Lawhorn to break down Governor Mike Kehoe’s State of the State address, including what we know so far about his plan to eliminate Missouri’s income tax, proposals to modernize Missouri’s tax system, and the need to rein in state spending. They also discuss open enrollment legislation, the new Missouri Advanced Nuclear Task Force and AI strategy executive order, the push to privatize downtown St. Louis convention center operations, what the Dome’s history says about stadium subsidies, Kansas City’s stadium debate, what they are watching in Jefferson City, and more.

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Produced by Show-Me Opportunity

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Governor Kehoe reinforced his support for MOScholars in his recent State of the State address. Building on the $50 million state investment approved during the 2025 legislative session, the governor is calling for an additional $10 million this year, bringing total funding to $60 million. These public funds will be combined with contributions generated through state tax credits to expand school choice opportunities for families across Missouri. Although MOScholars remains small relative to the size of Missouri’s K–12 student population, this proposed increase is a clear positive step toward a richer and more robust school choice landscape.

The governor also announced that Missouri will opt into a new federal tax credit program designed to operate much like MOScholars, but funded through federal tax credits. Under this program, taxpayers may redirect up to $1,700 of their federal tax liability to support school choice in Missouri. If widely used, the federal credit could significantly expand the pool of available funding—possibly enough to generate meaningful competition within the state’s education system.

These developments provide real cause for optimism about the future direction of education policy in Missouri.

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Going into the 2025 legislative session, it was clear that income tax reform was going to be a hot topic. Not only was it a top priority listed in the Institute’s 2025 blueprint, but numerous bills were also filed before the session began both to incrementally lower the income tax rate and to eliminate the tax altogether. Then, during his first State of the State address, Governor Kehoe officially stated his support for eliminating the individual income tax.

As my colleagues and I have written for many years, there are many good reasons for Missouri to abandon its reliance on the income tax. Decades of economic research have shown that the income tax is one of the most economically damaging forms of taxation, penalizing workers for their productive pursuits. But in recent years, 25 states (not counting Missouri) have lowered their income taxes, including many of Missouri’s neighbors, which should only increase our state’s urgency for meaningful income tax reform.

It’s no coincidence that year after year the fastest-growing states across the country are those without income taxes. If Missouri is serious about joining those states—and we should be—bold action in Jefferson City is necessary. While Missouri’s elected officials have been successful at lowering the state’s top individual income tax rate by 1.3% since 2014 (from 6% to 4.7% today), Missouri is still one of the states most reliant on income tax revenue.

Eliminating the income tax in a fiscally responsible way will not necessarily be easy given that Missouri’s budget has nearly doubled in size in recent years. But the process must start with a single step, and lowering the rate incrementally to 3.7% (what HB 798 proposes) is a great place to start. As lawmakers enter the home stretch of this year’s legislative session, there’s still a lot of work to be done if eliminating the income tax is truly the goal. Time will tell if their actions match their stated priorities.

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While the governor’s announcement didn’t precisely outline what he had in mind for Show-Me DOGE (department of government efficiency) or the timeline for implementing it, there’s reason to believe such an endeavor would be worthwhile for Missouri. Given the numerous examples of waste found by the federal DOGE effort thus far, and the fact that Missouri’s budget has nearly doubled in the past five years, it’s likely that a closer look at our state finances would be able to uncover significant savings.

Last month, my colleague Aaron Hedlund and I published a guide for establishing a Missouri Office of Government Efficiency (MOGE). Our guide explained Missouri’s recent runaway spending growth, discussed the benefits of the executive branch leading the charge of finding inefficiencies and cost savings, and outlined key principles that would increase the likelihood of success for any DOGE-type effort.

The ideas from our guide were informed by the work of then-California Governor Ronald Reagan back in 1967 that used private funding and non-government experts to provide an unbiased outside perspective on California’s government. All told, Reagan’s effort was able to find more than 2,000 areas for reform in short order, and if all were implemented, would have saved taxpayers more than $500 million, which adjusted for inflation would amount to about $4.2 billion today. Unfortunately, only about half of Reagan’s recommendations were ultimately implemented.

Reagan’s experience makes it clear that buy-in from both the legislative and executive branches of Missouri’s government will be necessary for success. The good news is that both chambers of Missouri’s general assembly have already established their own committees on government efficiency and have begun working diligently.

It’s long past time for a serious effort in Jefferson City to rein in the state government’s excess, and it’s great news that so many of our elected officials have stated their interest in taking up the task. Missouri’s general assembly has already started its work. Now it’s the governor’s turn to follow suit and seize the opportunity to rightsize our state’s government.

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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.

As my colleague Patrick Tuohey recently wrote, the rosy budgetary picture painted by Governor Parson during his final State of the State address was, at best, misleading. Missouri’s budget has nearly doubled over the past five years, and the governor’s more than $50 billion recommended spending plan for next year requires dipping into cash reserves to make ends meet.

In other words, it will be up to Missouri’s General Assembly to begin turning the tide on government spending, which will likely be easier said than done for several reasons.

First, the federal government is winding down its COVID-19 and infrastructure spending. This means that unless Missouri begins scaling back the services that have been propped up with federal cash, state taxpayers can expect to soon be on the hook for a higher level of government services than they were just a few short years ago. While the reduced federal funding will impact some parts of state government more than others, the Medicaid program is sure to need hundreds of millions of new state tax dollars.

Second, state tax revenues aren’t expected to grow at the rate they have in recent years. Fortunately, higher revenue collections over the past few years allowed Missouri to accumulate significant cash reserves, but some of those reserves have already been spent and the governor’s budget recommends spending more. There should be no expectation that Missouri’s tax revenue growth or remaining cash reserves will be able to fill the budgetary hole the federal government leaves behind, let alone cover the inflationary cost increases required to continue funding the state’s other spending priorities.

Given the harsh budgetary realities Missouri is facing, it’s especially troubling that Governor Parson and the general assembly are reportedly considering expanding the state government’s role even further. For example, Governor Parson is recommending funding—in a budget that relies on one-time cash reserves to maintain balance—childcare and teacher pay programs that will likely become new long-term spending obligations.

In a perfect world, Missouri taxpayers wouldn’t have to ask their elected officials to be good stewards of the state’s finances. Policymakers would prepare for rainy days and take future spending obligations into account when they craft the yearly budget, ensuring the state’s revenues and spending are on sustainable trajectories. Unfortunately, that doesn’t appear to be happening right now. For now, Missourians are going to be left hoping that something changes between now and the end of the legislative session.

The post Missouri Needs Better Stewards appeared first on Show-Me Institute.

– Key takeaways from Governor Parson’s State of the State address
– Does Missouri have a budget surplus?
– A “source of income” ordinance passes in KC
– What’s moving in Jefferson City, and more

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LINKS:
Patrick Tuohey’s blog: showmeinstitute.org/blog/budget-and…budget-surplus/

David Stokes Testimony on Source of Income Rules: showmeinstitute.org/publication/mun…es-for-rentals/

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The post State of the State, School Spending and the STL Earnings Tax appeared first on Show-Me Institute.

But boy, is there a lot of spending—some of which might be justified, such as expanding Interstate 70—but the emphasis on expanding government made the speech basically indistinguishable from a speech by a tax-and-spend liberal. The governor didn’t propose a single meaningful change to the state’s failing education system or suggest a single reduction in government. Nothing about further tax cuts. Nothing about anything truly aspirational, reform minded, or geared toward good governance at all.

It’s understandable that the governor would want to pursue some form of legacy initiative or project near the end of his final term. Frankly, redoing I-70 should be plenty. But programs that permanently expand the reach of Missouri’s welfare state—like a universal pre-K program that the Heritage Foundation has eviscerated time and again—run completely against the small government view that many politicians in Missouri had historically given lip service to.

Perhaps in future speeches and press availabilities, the governor will expand upon his State of the State remarks, adding back in some of the reform-minded small government conservatism.  The legislature has been advocating for a variety of these small government reforms, and I thought the governor’s office was in agreement. The governor can, and should, do better.

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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.

In addition to bolstering money for drug courts and prisoner re-entry programs, Parson is planning on closing Crossroads Correctional Center near Cameron and moving inmates and staff to other prisons across the state….

“This decision is largely driven by our dedication to find efficiencies wherever we can in state government — and this can be done while ensuring safety, improving security and delivering a much needed pay raise. All being done with no layoffs.”

I’ve talked about the Crossroads bit before, but there’s more going on here than just straight taxpayer savings through consolidation.

KTTN radio out of Trenton, Missouri, has an interesting post up with audio from Rep. Louis Riggs, talking about some of the same criminal justice issues. Notably, Rep. Riggs says that along with being “smarter” about our criminal justice strategy, “we don’t need to be breaking up families and taking people’s licenses away.” It’s refreshing to hear language like that, which not only considers the issues of punishment—but of rehabilitation as well, with an emphasis on avoiding incarceration where possible.

My colleagues Patrick Tuohey and Emily Stahly have been all over issues of criminal justice reform, so I know they’ll be following developments in Jefferson City closely. But it is good to see the state re-examining what Missouri does in terms of criminal justice and how it can improve outcomes—for taxpayers, and for the accused.

The post Criminal Justice Reform Getting Attention in Missouri appeared first on Show-Me Institute.

That pushback didn’t materialize, though, because not only would jobs not be lost, but the workers at Crossroads would be employed at a nearby facility. Specifically, when I heard it mentioned during debate on the Senate floor that Crossroads was across the street from the facility it would be consolidated with—the Western Missouri Correctional Center (WMCC)—at first I thought that was an exaggeration. “Across the street?” Really?

But lo and behold, Missouri has had two prisons operating across the street from each other for about 20 years now:

Why it took so long to consolidate the prisons, I’m not sure. Because Crossroads is a maximum-security prison, security will have to be fortified in at least part of WMCC, to the tune of about $3 million. Perhaps that was the reason. But that $3 million is a small price to pay for even larger savings, and from a good governance perspective, it sure looks like bringing these facilities together is the right call. Missourinet elaborated on the reasoning for consolidation:

The department has been battling to fill hundreds of correctional officer job vacancies. [State Department of Corrections Director Anne] Precythe says the reorganization plan will create a fully-functioning, safe environment, versus trying to “limp along” with two half-staffed, half-full institutions.

The estimated $20 million savings from closing CRCC is slated to give department employees, minus executive staff, a one percent pay raise for two years of continued service. If Parson’s proposed three percent state worker pay increase happens, then corrections workers would get another raise. Precythe has touted the pay boost as the largest in the department’s history.

This consolidation may have been in the works for a while, but whatever its genesis, it’s an elegant solution to saving taxpayer money and reorienting, if ever so slightly, the state’s criminal justice strategy. If the state can build fewer prisons and push potential inmates back into being contributing members of society, Missourians on the whole will be that much better off.

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Missouri’s Constitution requires the state’s legislature to pass a balanced budget—meaning the government cannot budget to expend more funds than there are revenues. This requirement leaves our elected officials with difficult decisions each year, because the proposed budget increases for current state programs continue to outpace revenue collections. As lawmakers express concern regarding the revenue estimates assumed in the Governor’s budget recommendations, it is more important than ever to ensure that all state dollars are spent on worthy projects.

My new essay, “Missouri’s Budget: A Primer,” provides a step-by-step explanation of the state’s budgeting process and describes the measures available to elected officials when revenue collections exceed or fall behind the estimates used in the creation of the budget. The essay also includes two graphics that should make navigating the state’s budget more manageable. The first is a timeline outlining the budgeting process, and the second offers a list of topics to follow as the budget makes its way through the legislature.

Click the link below to read the entire essay.

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• Workforce development wasn’t just mentioned in the speech—it was singled out as one of the two most important policy priorities moving forward. Patrick Ishmael has been out in front of this issue, writing on the importance of workforce development, particularly in the area of vocational training. Readers of this blog may also have seen posts by Emily Stahly on the potential for charter schools to help give Missouri a more skilled workforce, and by Abigail Burrola on how a focus on industry-recognized credentials could better prepare our high-school graduates for good jobs after graduation.
• Infrastructure was the other issue designated as a top priority, particularly the pressing need to fund necessary repairs and improvements to Missouri’s highway system. Back in 2016, Joe Miller wrote a comprehensive paper on options for funding the Missouri Department of Transportation. More recently, Graham Renz and Patrick Tuohey have advocated for user fees as the best way to fund our state’s transportation needs, whether through a gas tax or some form of tolling.
• The Governor noted the drain on the state’s finances caused by Missouri’s high incarceration rate and his desire to avoid building more prisons. Ways to help keep prison populations down include reform of laws governing mandatory minimum sentencing and efforts to help ex-offenders enter the workforce, as Patrick Tuohey has written.
• The need to control the growth in the cost of the state’s Medicaid program was also discussed. Elias Tsapelas has not only written on this topic, but has also looked at measures being taken in other states to address the problem

Even topics mentioned only in passing during the speech have been covered by Show-Me Institute analysts, including telemedicine, tax credit reform, and educational challenges facing children with autism and other disabilities.

It’s encouraging to hear that so many long-overdue reforms may be on the docket during the current legislative session. As we watch to see if 2019 will bring important changes to Missouri policy, we’ll continue to research and advocate free-market solutions that will help move our state forward.

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But once the hard numbers were established, the article started to go off the rails.

First, the author makes the case that Physics First should be counted as “Physics” for the purpose of measuring course access. I disagree. Physics First is, by the author’s own admission, an “introductory science course.” There is absolutely nothing wrong with introductory courses, but if we allow Physics First to “count” as the only physics course offered in a district, we are defining our expectations down severely. Just like we would want a district that only offered Geometry or Algebra to step up its game, so too should we if it only offers Physics First.

The author then proceeds to use overall physics enrollment in the state to make the case that Missouri is not behind the rest of the nation when it comes to Physics. The problem is that overall enrollment numbers don’t have a lot to do with course access. Sure, Missouri might have one of the higher rates of Physics enrollment around the nation, but how is it distributed? Given the population patterns of the state, high enrollment in our cities and suburbs could mask the fact that rural students don’t have access to higher level courses. Given the author’s own findings that 178 districts don’t offer advanced Physics, this very well might be the case.

But perhaps most problematic is the blurred line between fact and opinion. Whether we should count Physics First is a judgment call on which reasonable people can disagree. The author assumes that the Governor was using the Physics course access statistic to buttress a point about Missouri being behind on academic indicators. I took it as a simple statement that not enough districts offer Physics. Again, reasonable people can disagree. When we look at the hard numbers (not counting Physics First) from 2014-15, the Governor was off by less than 5 percent. If we look at our updated 2015-16 numbers, he was off by less than 3 percent. That doesn’t strike me as being “mostly false,” but I’ll leave that for readers to decide.

That said, I don’t want to go too far down the rabbit hole of debating how many angels can dance on the head of a pin. We cannot lose sight of the fact that, whatever you think on the question of defining Physics courses, far too many school districts do not offer higher-level classes. This includes not only Physics, but Calculus and AP classes as well. And those are not just statistics, but real children’s lives that are being denied the opportunity to get the education they need. Let’s focus our energy on fixing that.

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To accomplish this, he expressed specific support for two policies on which Show-Me Institute writers have researched and published on extensively: course access and education savings accounts. These two policies have the potential to help thousands of students in Missouri.

Touching on course access, Gov. Greitens described a serious need of the high school students in our state:

Over half of Missouri school districts do not offer a single Advanced Placement class. Over 200 of our 520 school districts did not have a single student in physics. Over 100 did not have a single student enrolled in chemistry.

We need to expand course access programs, so that every child in Missouri can use technology to get the education they need.

We appreciate the Governor recognizing this problem and committing to expanding course access programs. Here are more resources for those interested in learning more about course access and its relation to rural school performance:

• 2017 Blueprint: Moving Missouri Forward with Course Access
• Course Access in Missouri: Diversity, Personalization, and Opportunity
• Rural School Reform
• Rural Schools Need Course Access
• Teacher Shortage Data from DESE Makes Great Case for Course Access Program

Regarding education savings accounts (ESAs), Governor Greitens stated:

We also need to make sure that every child in Missouri, especially those kids with special needs, get a fair shot at the American Dream. I will work with you to implement education savings accounts for children with special needs.

Again, we completely agree with the Governor that ESAs would help Missouri students, especially students with disabilities. Here is some of our work on ESAs:

• 2017 Blueprint: Moving Missouri Forward with ESAs
• ESAs Can Help Missouri Students with Dyslexia
• Malachi’s School Choice Story
• ESAs Found Constitutional in Nevada
• Empowerment Scholarship Accounts Would be a Boon to Missourians

It is encouraging to see that the Governor is an ally of school choice, and we look forward to seeing what he and the Missouri State Legislature accomplish.

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But sadly, the Governor's positivity doesn't bring back the missed opportunities of the last seven years. In Jefferson City we have seen hostility to substantive income tax cuts, opposition to serious education reforms, the promotion of a long line of tax incentive boondoggles, and the rejection of reasonable reforms to the state's labor policies. This year's priorities also leave something to be desired; for instance, "keeping tuition low" at Mizzou, a key plank from last week's speech, is probably a misplaced priority while the University fights to earn back the trust of the taxpayers who fund it. 

A few months remain for the Governor and the Legislature to make real progress on a host of important policy matters, and I expect that there will be some forward movement on ethics reform before he leaves office. That is a great thing. I worry, however, that that's where the progress will end. Let's hope not.

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There were some appealing aspects to his speech, like his thoughts on how to address our transportation infrastructure. Gov. Nixon stated:

One option is a toll road on Interstate 70. The Highway Commission’s recent report showed that this approach could make I-70 better and safer … and free up tens of millions of dollars for other roads around the state. Trucks and out-of-state vehicles that do the most damage to I-70 would have to pay their fair share. That deserves serious consideration. Here’s another option: the gas tax. Missouri’s gas tax hasn’t gone up a penny in nearly 20 years. It’s the fifth-lowest in the nation.  With gas prices as low as they are now, this is worth a very close look.

Kudos to Gov. Nixon for at least considering user fees as a way to finance transportation in the state. My colleague Joe Miller has written extensively about the benefits of tolling and how gas taxes are a better way to fund roads than the sales tax. Tolling is a fair way of financing improvements to Interstate 70 because it can be done in such a way as to get much, or even most, of its revenues from commercial vehicles, which cause the most damage to our roads and highways.

However, not everything in Gov. Nixon’s address was good policy. The governor still insists on expanding Medicaid.

Now I’d like to talk about another challenge … but an even greater opportunity: Strengthening and reforming Medicaid. Let me remind you, a lot has changed since last year. Since I stood here last year, Missouri taxpayers have sent $2 billion to Washington. Those dollars are being used right now, in other states, to reform and improve their Medicaid systems. That’s 2 billion Missouri taxpayer dollars.  And this year, there’s another $2 billion at stake. If we keep standing still, that’s $4 billion Missourians will have lost to other states by the end of this year. Across the country, people are moving past the politics.

To help you decipher politico speak, when the governor talks about reforming Medicaid, he really means expanding Medicaid. Show-Me Institute Senior Analyst Patrick Ishmael has done a tremendous job explaining why expanding Medicaid is a bad idea. Not only would it strain future Missouri budgets by adding billions in new spending (Medicaid already takes up 22 percent of Missouri General Revenue expenditures, up from 17.5 percent just 10 years ago), but the program doesn’t work. The poor should get decent health care; Medicaid fails on that front.

Gov. Nixon raises the point about Missouri taxpayers sending money to Washington, and by failing to expand Medicaid, other states get to spend our money. This is also false. Patrick lays out why this claim is wrong in his most recent Forbes piece. First, Missouri is a net recipient of federal tax dollars. This means that Missouri gets more in federal aid than it sends out in tax dollars. Also, the money for Medicaid expansion is not like some large pie that gets distributed to the states that participate in the expansion. Each state has its own allotment of money to help pay for expansion. If the state doesn’t expand Medicaid, the money isn’t reallocated. That’s why you are seeing the overall cost of Medicaid dropping. Fewer states are signing up for expansion, and thus the actual cost growth of Medicaid is falling below what was projected. If the money was being redistributed, actual cost growth would be closer to projections.

Gov. Nixon’s speech was a mixed bag. The legislature should feel free to ignore the bad ideas. I hope, though, that the good parts mentioned above do more than just receive serious attention. There are serious issues in this state that need addressing, and we need pro-market solutions.

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