Missouri’s fiscal mess
In matters of public policy, Missouri historically is more of a follower than a leader. Healthy skepticism is often warranted, but Missouri’s kick-the-can-down-the-road approach toward important fiscal matters is now costing state taxpayers dearly.
Like nearly every other state, Missouri has a constitutional balanced-budget requirement. The Show-Me State also has what some consider one of the strongest tax and expenditure limits in the country, commonly referred to here as the Hancock Amendment. These safeguards give the appearance of a state that takes fiscal issues seriously and is otherwise rightfully concerned about the negative effects of creeping government growth. Unfortunately, Missouri’s taxpayer protections have been no match for the federal government’s budgetary onslaught in recent years.
As recently as 2013, Missouri’s total yearly budget sat at a little less than $24 billion, with less than 30 percent of that funding coming from the federal government. Over the next decade, Missouri set new records for state spending every single year. Going into next year, the state’s budget is expected to rise to more than $53 billion, nearly double what was spent a mere six years ago. Even worse, the federal share of total spending has climbed to nearly 50 percent, with next year’s federal estimate ($25.8 billion) eclipsing the spending total of Missouri’s entire 2013 budget.
How did we get here? It’s hard to pinpoint a single cause, but the state’s unwillingness to pass on what seems like “free money” from the federal government is a major factor. What were once seen as state prerogatives, such as maintaining roads, educating kids, and caring for the needy, are now areas where the federal government holds enormous power. It is important to note that Missouri lawmakers readily ceded this power in exchange for additional federal assistance.
Today there are more than 1,200 federal grant programs totaling more than $1.2 trillion that are wreaking havoc on state budgets across the country, with the largest such program being Medicaid. In fact, Medicaid has been the single largest driver of Missouri’s budget growth over the past decade. Prior to the federal government’s passage of the Affordable Care Act (ACA) in 2010, Missouri’s Medicaid program covered around 840,000 Missourians at an annual cost of approximately $7 billion per year. Next year, the program’s costs are expected to exceed $18 billion to cover around 1.3 million people. In other words, one in five Missourians will be covered at a total cost of around $2,800 per resident.
For nearly a decade following the ACA’s passage, Missouri was able to resist extending Medicaid coverage to able-bodied adults and the increased federal funding that accompanied such expansion, but in 2020 Missouri voters approved Medicaid expansion through a constitutional amendment. Since then, the program’s enrollment and costs have exceeded all pre-expansion estimates, and have further increased Missouri’s reliance on the federal government. To help cover these new costs, Missouri has turned to Medicaid financing gimmicks known as provider taxes and has even drawn from federal COVID relief funds to avoid bringing the program back in line with what state taxpayers can afford.
Missouri lawmakers readily ceded this power in exchange for additional federal assistance.
Medicaid is not the only area in which federal funds have warped state behavior, but perhaps it’s the most instructive. Rather than worry about the state’s financial future, Missouri lawmakers have used the readily available federal funds to avoid reckoning with the trade-offs that accompany policy decisions. While it’s common in red states like Missouri for elected officials to tout the benefits of tax cuts, they now face an unavoidable economic reality: after years of growing government spending and accepting new streams of federal money, how can states afford any revenue decreases that might result from meaningful tax reform?
All told, Missouri’s fiscal experience in recent years should serve as a much-needed wake-up call for lawmakers. Looking toward the future, there’s no doubt that the current trends are unsustainable. After years of excess, it should alarm everyone that when the federal government finally considers scaling back their financial intrusion on state budgets, so many states are warning of impending financing doom.
Elected officials in Missouri—and nationwide—must take responsibility for the fiscal mess created on their watch. It’s time to make the tough decisions needed to put budgets on a sustainable, self-reliant path. If the past decade has taught us anything, it’s that delay only deepens the damage.
Elias Tsapelas is the director of state budget and fiscal policy at the Show-Me Institute in St. Louis, Missouri.
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