Missouri's FY 2026 Budget

Major Investments, Strategic Vetoes, and Fiscal Caution Ahead
|
Other
Jefferson City, MO at sunset.

Missouri Governor Mike Kehoe has officially signed the state’s $50.8 billion budget for Fiscal Year 2026, including $15.4 billion in general revenue spending. While the budget includes significant new investments in child care and education, Governor Kehoe also issued $300 million in line-item vetoes, signaling a cautious approach as Missouri prepares for a projected $1 billion general revenue shortfall in FY 2027.

A Closer Look at the Vetoes

Governor Kehoe’s $300 million in vetoes reflect a deliberate attempt to preserve funding for three critical priorities:

  • K-12 Foundation Formula: A nearly half-billion-dollar boost ($497 million) to Missouri's public school funding mechanism, ensuring continued investment in K-12 education.
  • Tax Cuts: The governor cited the state’s new capital gains tax cut — estimated to cost the state about $400 million — as a reason for the fiscal restraint.
  • Disaster Relief: With $216 million earmarked for disaster-related expenses, maintaining budget flexibility was key.
2026 Budget Wins: Child Care and Education

Despite the vetoes, several landmark funding increases were preserved in the final budget, particularly around child care and education—areas long cited as essential to workforce development and long-term economic growth.

1. Child Care Subsidies – $107 million

Missouri is making a historic investment of $107 million to improve child care accessibility. The funds will:

  • Increase subsidy rates based on the latest market rate survey.
  • Shift subsidy payments to a prospective model based on enrollment, not just attendance—making it easier for providers to plan and operate sustainably.

2. Foundation Formula – $497 million increase

The nearly half-billion-dollar boost to Missouri's school funding formula underscores a strong commitment to public education at a time when many school districts are grappling with inflationary pressures and staffing challenges.

3. MO Scholars – $50 million *Lawsuit from MNEA

This funding will expand access to scholarships for low-income and special-needs students, supporting school choice options and tailoring education to diverse student needs.

4. Child Care Innovation Grants – $10 million

This initiative encourages creative, community-based solutions to expand child care capacity, especially in rural and underserved areas.

5. Child Care Cost-Share Program – $2.5 million

While lawmakers approved $5 million for a cost-share initiative to help employers and employees share the burden of child care expenses, the governor approved only half. This partial funding reflects his cautious approach to discretionary spending as the state braces for future revenue constraints.

Looking Ahead: Fiscal Tightrope for FY 2027

The looming $1 billion shortfall in general revenue for FY 2027 casts a long shadow over this year’s budget. Governor Kehoe’s administration is signaling a shift toward long-term fiscal discipline, even as it makes targeted investments in areas seen as crucial for economic resilience.