Overly optimistic predictions for revenue from the lottery and casino taxes will cost Missouri school districts $245 per pupil before the fiscal year ends in June. And state lawmakers are now building next year’s budget around other funding sources that may prove just as uncertain.
The Missouri Senate on Wednesday approved a spending plan for K-12 education that dips into money set aside for renovations on the state Capitol Building. During debate, state Sen. Rusty Black, chairman of the Senate Appropriations Committee, said he’s received no assurance from House Budget Committee Chairman Dirk Deaton that he will agree to the diversion or promises from Gov. Mike Kehoe that the spending will be approved if it is in the final budget.
“Have you talked to the second floor?” state Sen. Lincoln Hough, a Republican from Springfield, asked Black, referring to Kehoe’s office.
“No guarantees,” said Black, a Republican from Chillicothe.
“What if he vetoes that,” Hough asked a little later in the discussion.
“Anybody that sent me a thank you for doing this would probably want their thank you back,” Black replied.
The Senate budget uses $118 million from the Missouri State Capitol Commission to close a gap in the foundation formula, the basic state aid program for public schools. Another $15.2 million was added to school transportation funding.
Most of the $4.3 billion for the foundation formula and $361.5 million for transportation in the current budget comes from the general revenue fund. The remainder is provided by lottery revenue, casino taxes and other funds.
The formula is designed to provide school districts enough money so each district can spend an amount for each student that is similar to that being spent on high-performing districts. Called the state adequacy target, it is $7,145 during the current fiscal year.
“It is unlikely that the amount of revenue received from lottery, cigarette tax and gaming funds will meet the amount appropriated,” the Department of Elementary and Secondary Education said in a statement to The Independent.
The department predicts a shortfall of approximately $138 million from those funds in total. That would reduce the amount paid on the state adequacy target from $7,145 to just over $6,900.
The appropriation bill for the education department was the first of 12 spending bills to fund state government operations approved Wednesday in the Senate. Democrats opposed many of the bills, sometimes picking up one or two Republicans but never putting any bill in danger of failing to receive the 18 votes needed.
Some of the major differences with the budget plan approved last month in the Missouri House are:
• Reversing a radical overhaul of higher education funding that took all of the direct support for community colleges and state universities and redistributed it based on full-time student counts. Some schools would have received substantial increases, like an additional $30 million for Missouri State University in Springfield, while others, like Lincoln University in Jefferson City and Truman State University in Kirksville, would be cut by up to 50%.
• Restoring money cut from child care subsidies.
• Moving about $61 million in funding for state information technology support to the Department of Social Services to help the department prepare for implementation of new federal welfare program rules and meet client service requirements.
• Cutting $42 million for payments on a trouble-plagued accounting system, instead setting aside about $5 million to revamp and revise the system while keeping the older system intact as a backup.
The next action on the 12 bills will be a conference with members of the House and Senate negotiating differences between the two spending plans. After the bills passed, Black said he will turn to four bills for construction and maintenance of state facilities, including a reappropriation bill for ongoing projects, next week.
All spending bills must be passed by May 8.
The Senate budget for operations uses $48.8 billion from all funds, including $15.5 billion from general revenue. That is $1.7 billion less overall than the versions passed in the House last month and $3.3 billion less than requested by Kehoe in January.
Much of the apparent savings is from shifting large ongoing projects, like a $1.7 billion broadband construction program, the reappropriations bill.
The general revenue portion remains in deficit to expected revenues of $13.6 billion and would require $1.9 billion from accumulated surpluses to sustain spending.
Hough, with support from Democrats, wanted to dip deeper into the surplus, which stood at $3 billion on March 31, because the foundation formula is short of what state law says should be spent by $190 million.
Hough’s amendment to add the money failed on a 10-20 vote. No other Republicans voted for the amendment.
The formula is underfunded because the budget does not allow for extra weight given to some student needs in a bill passed in 2024 and does not fund the incentive for schools to maintain five-day weeks.
“Missourians deserve better than the budget that we have presented before us,” state Sen. Maggie Nurrenbern, a Kansas City Democrat, said as the day of debate neared its conclusion. “The reason why is, over the last decade, there have been special tax breaks all over the place for the wealthy and the well connected.”
The state would have an additional $3.8 billion in revenue if those tax cuts had not been passed, Nurrenbern said.
“A lot of these problems in our budget really are self-inflicted,” Nurrenbern said.
The difficulties in sustaining school funding in the current year — and the need to tap funds set aside four years ago for expanding the capitol — is due to overly optimistic projections for spending lottery proceeds and casino taxes.
Money from the lottery is also tapped to provide a portion of the budget for school transportation, community colleges and four-year universities. When they wrote the budget currently being used during last year’s session, lawmakers decided the lottery should provide $410.5 million.
It was the third year in a row that the lottery was asked to provide more than $400 million. In the first two years, the revenue was $389.8 million and $337.5 million. So far this year, lottery revenue is up 4%, a pace that would provide about $350 million, leaving it $60 million short of appropriations.
Casino revenue, which is exclusively used in the public school formula, was penciled in to provide $385 million, or $22 million more than taxes on gambling losses provided in fiscal 2025. Casino revenue is up about 7% and could reach that amount.
The House-passed budget maintains the optimistic projections for lottery and casino revenue and saves general revenue in the formula by using $64.7 million in accumulated surpluses in the Blind Pension Fund as directed by the Missouri Constitution.
The Senate plan cut expectations for lottery, casino and other revenue in favor of the capitol commission funds. It restores general revenue cut in the House and leaves the Blind Pension Fund untouched.
Unlike the dispute over funding public schools, the action to reverse the House plan for higher education won bipartisan approval.
“When we go to conference, we absolutely cannot back down on this,” Nurrenbern said.
And Senate President Pro Tem Cindy O’Laughlin, a Shelbina Republican who represents Truman State University, said she would not go along with the House plan.
“The idea we would just summarily cut half of their funding seemed horrible to me and one that I would not back,” she said.
In the budget debate that extended over almost nine hours, items large and small were singled out for questioning. In the Department of Natural Resources budget, it was $2 million to buy flood-prone farmland in Jefferson County for conversion to a park.
The earmark appeared for the first time in the new version of the bill Black brought to the floor. Nurrenbern said it should have been discussed in the appropriations committee.
“This causes me a lot of consternation to see $2 million for general revenue to go to something like this,” she said.
In the Department of Agriculture, it was $20 million for moving a road at the State Fairgrounds in Sedalia, a project that has quadrupled in cost since it was first requested by Kehoe.
Black tapped interest accumulated in the money set aside for widening Interstate 70 for that project. Using those funds has the blessing of Kehoe’s office, he said.
“I wouldn’t necessarily call it a governor’s amendment, but whenever they brought this to me a week ago, they said that they would support that money coming out of that fund,” Black said.
The House tried to sweep all the accumulated interest into the general revenue fund but Black reversed that decision in the Senate budget plan.
Nurrenbern said it was an example of Republicans finding money when they supported spending while pleading poverty when other programs need money.
“When we have limited resources and we have to make tough choices,” Nurrenbern said, “it seems like these are priorities of the Republican Party to prioritize building this road in Sedalia for the State Fair versus doing investments for our people across our state.”
The final sharp debate of the evening came on how the state is using $50 million dedicated to a school voucher program called MOScholars. Eligible students can receive an amount equal to the state adequacy target to support a private education.
Senate Minority Leader Doug Beck, a Democrat from Affton, criticized State Treasurer Vivek Malek, who administers the program, for allowing data on individual voucher recipients to be posted on his office website for nearly a year while denying that such data was available.
The Independent reported on the data breach this week after informing Malek’s office the information was available and allowing him time to remove it from view.
“Why is the treasurer running this program?” Beck said. “Why is he doing this when literally has no idea what’s going on? He has not a clue how to do this and not a clue how to run this program.”
Beck said he has been seeking information for many months about whether current or former members of the General Assembly were benefiting from the program. He offered an amendment to the treasurer’s budget to deny salary payments to any elected official or state employee who does not report voucher benefits on required financial disclosure statements. The amendment was defeated.
That disclosure proposal was not as broad as Beck thinks it should be, he said.
“We should know,” Beck said, “any taxpayer who receives $7,500, or whatever the case may be, from this program. That should be disclosed.”
