MOScout Daily Update: Kehoe’s SOTS Speech Touts Income Tax Cut, Tightening Belt, and Various Legislative Items
Happening this morning… The Governor's Prayer Breakfast (7:30AM) at the Capitol Plaza Hotel. “This year's theme, One Nation Under God, will highlight the shared values of faith and service that guide our state and nation.”
SOTS – Big News
The two big pieces of news from Governor Mike Kehoe’s State of the State speech were seemingly contradictory: the state is entering a period of budget austerity, and it’s time to eliminate the state income tax. Kehoe faced this head-on, saying plainly: “We can do both. We can maintain a balanced budget that supports essential services and pursue a tax policy that improves Missouri’s competitiveness.”
Austerity
Kehoe said that “government has clearly grown too large.” He cited the recent splurge fueled by COVID-19 money. “Since Fiscal Year 22, over 3,400 new budgetary items have been added, at the cost of nearly $13 billion in new general revenue spending.”
· As a result, his budget “cuts more than $600 million from the core” budget.
· It does not increase the foundation formula.
· It does not increase pay for state workers, despite the continued upward march in inflation
Kehoe warned he would restrict spending and line-item veto expenditures that strayed from his path of austerity.
· Many in this building, and I’m not just talking about legislators here, will be tempted to reverse these cuts, to restore this spending. While that is certainly your prerogative, any reversal or new spending item must have a pay for. This is my commitment to Missourians: when I take action on this budget in June, it will be balanced.
This budget is still spending more than projected revenues. It basically eliminates the state’s fund surplus balance. That means this isn’t a one-and-done tough budget year. Next year will be painful as well, maybe even more so.
Income Tax
Kehoe said the elimination of the state income tax as necessary to compete with other states.
· When we’re competing against states like Tennessee and Texas, states with no individual income tax, too often the conversation ends before it truly begins.
But he framed it as reform, rather than a cut.
· Missouri’s tax structure must evolve… Much of our commerce happens through monthly subscriptions and digital services like online advertising, e-books, and AI platforms that fall outside our current sales tax base… This plan is about aligning our tax code with today’s economy and not yesterday’s. Missouri’s tax code was built for the past 100 years.
The first step, he said, would be to seek approval from the voters.
· The question before Missourians will be clear: Should Missouri begin a phased elimination of the individual income tax, with a full repeal within the next five years.
That, obviously, leaves some of the difficult details to be determined.
SOTS – Smaller News
Other notable news from the day…
· The MO Scholars voucher program would see an increase in funding from $50 million general revenue to $60 million. That’s less than the $100 million Treasurer Vivek Malek had floated, but still substantial particularly while cuts are happening elsewhere.
· The state said that St. Louis City has been a great partner as they’ve worked through issues with the tornado clean-up. The budget has $186 million to continue to help with demolition and cleanup.
· Kehoe specifically praised Auditor Scott Fitzpatrick’s analysis about the fragility of the state’s financial situation.
· Kehoe addressed the abortion issue, saying that “protecting the unborn is important to Claudia and me, and we ask Missourians to vote yes on Amendment 3.”
Legislative Laundry List
Here’s a list of legislation that Governor Kehoe specifically called for action on during his speech…
Putting the elimination of state income tax before voters.
· Jon Patterson - HJR 165.
· Curtis Trent - SJR 83.
Updating Missouri’s Renewable Energy Standard.
· Josh Hurlbert - HB 2807.
· Mike Cierpiot - SB 383.
Enhancing the Missouri Works program to include incentivizing capital investments exceeding $50 million.
· Sherri Gallick – not yet filed.
· Jamie Burger - SB 1443.
Changes to the juvenile justice system.
· Brad Christ - HB 2498.
· Nick Schroer - SB 888.
Sentencing reform.
· John Black - HB 2637.
· Bennie Cook - HB 2880.
· Bill Hardwick – not yet filed.
· Curtis Trent - SB 882.
· Joe Nicola - SB 1294.
· Jill Carter - SB 894.
Allowing pregnant women facing abuse to finalize divorce proceedings.
· Cecelie Williams - HB 1908.
Increasing regulations around industrial solar developments.
· Cindy O’Laughlin - SB 849.
Public school open enrollment.
· Brad Pollitt - HB 2604.
· Curtis Trent - SB 971.
A – F School report cards.
· Jon Patterson - HB 2539.
· Ben Brown - SB 1194.
State takeover of MSHSAA.
· Bennie Cook - HB 2278.
· Jason Bean - SB 863.
Executive Orders
During the speech, Governor Kehoe touted executive actions he took yesterday to jump-start various policy initiatives…
· DOGE - I signed an executive order that reinforces our commitment to government efficiency, a new initiative: Missouri GREAT. This will not only involve members of the Cabinet, but business leaders from successful Missouri-made companies who will help us bring efficient, business-speed practices to our state agencies. They will recommend solutions to both my office and the General Assembly to increase efficiency, eliminate waste, and improve accountability. See the executive order here.
· Nuclear Energy - I signed an executive order establishing the Advanced Nuclear Energy Task Force to build on the work being led by President Trump at the federal level and promote nuclear energy deployment in Missouri. See the executive order here.
· AI - I signed a third executive order ahead of this address that will reinforce Missouri’s commitment to safely and effectively use AI in state government operations, building upon the initial success we have already seen. This executive order will also support our state’s role in, as President Trump calls it, “the space race of our time,” and ensure that our policies around AI are both pro-business and pro-consumer. See the executive order here.
· A-F School Report Cards - Under this order, DESE will present data in a clear, concise way each year, giving parents and families the ability to easily discern results, all while maintaining existing reporting requirements that continue to hold schools and their leadership accountable. See the executive order here.
Return of Shawan?
SEMO Show-Me Conservatives PAC was formed. It’s in support of Jeff Shawan for state representative. Shawan served in the House for one term, 2019-2021, before losing a bid for Senate 25.
· Shawan doesn’t have a candidate committee established, but I believe he’d be a candidate in House 152 where Rep. Hardy Billington is term limited.
SLPS Downgraded
Post-Dispatch reports that the State Board of Education voted to classify the St. Louis Public Schools as provisionally accredited, “a largely symbolic label indicating academic, governance and operational challenges. The distinction carries no changes to funding or operations, but is intended to trigger additional advisory support from the state.”
· The motion to lower SLPS' accreditation status was made by board member Kerry Casey… Casey said her rationale was SLPS' continued instability in leadership with five superintendents in three years, a declining fund balance without a plan to reduce deficit spending, recurring transportation problems and delays completing a required annual audit for the last three years.
What It Means
There have been some voices – not in the governor’s office – in Jefferson City that have pondered the notion of a state takeover of SLPS. While I don’t expect any action in the near term, this does add fuel to those arguments.
Unions Build Workforce Pipeline
The St. Louis Business Journal reports that “the real estate arm of Plumbers & Pipefitters Local 562 is adding a new St. Louis-area training center to meet the demand from people who are entering the profession.”
· Local 562, which has about 4,500 members and 400 apprentices, expects to be able to begin some classes in the new space by this time next year, O'Mara said. The union works with local schools, including St. Charles Community College and Ranken Technical College, to bring in apprentices monthly…
What It Means
Many unions have the best workforce programs in the state. And they’s seeing strong demand.
Maps for Sale
Missouri District Maps are for sale again. These used to be distributed for free to legislators before “Clean Missouri” clamped down on gifts. The high-res maps show statistics from the University of Missouri system, by district:
– 2024 UM student enrollment
– 2024 UM alumni
– 2024 UM employment
– 2024 MU healthcare services
– 2023 MU Extension services
$5K+ Contributions
Senate Democratic Campaign Committee - $15,000 from Missouri Law Enforcement for Good Government PAC.
Lobbyist Registrations
Amy Blunt added Board of Education for the School District of Springfield R-12.
Tony Dugger added Total Wine & More.
Mike Grote added Columbia Chamber of Commerce, Anti Defamation League, and Acentra Health.
Heath Clarkston, Mike Henderson, and Doug Nelson added Knox Company.
Ryan Miller and Sean Pascoe added Teva Pharmaceuticals USA, Inc.
Jewell Patek added Missouri Action for Kids, and Missouri Future LLC; and deleted International Legal Finance Association, A Place for Mom, and Caring.
Shawn Rhoads added Knox Company; and deleted Dish Network LLC.
Mike Gibbons and Tricia Workman deleted United Capital City Athletics.
Happy Birthday
Happy birthdays to Sen. Mike Cierpiot, Daniel Hall, and Margaret Donnelly.