Session Approaches Midway Point
This is the final week of session before the legislature adjourns for spring break. The break typically serves as the midpoint of the legislative session and often marks a shift in focus for both chambers. At this point in session, each chamber will need to finalize their work on priority legislation and move them to the other chamber in order to set up the sort of end of session negotiating that occurs each year.
House Budget Committee Begins Work on FY 2026–27 State Budget
The House Budget Committee will begin its markup process on the state budget this week. Budget Chairman Dirk Deaton has released the House’s initial working draft, which will serve as the starting point for committee discussions and potential amendments
House Committee Substitute Changes
At this stage, there are very few changes from the Governor’s original recommendations for K–12 education funding. A proposal like this is a bit unexpected given that Missouri lawmakers are confronting projections that the state may need to reduce spending by approximately $2 billion over the next two years due to slowing revenue growth, tax policy changes, and ongoing growth in the state budget.
Its important to point out that this is a starting point for the week ahead and several things could change as the House Budget Committee engages in their markup process.
Because the House proposal closely mirrors the Governor’s budget, this provides a helpful opportunity to revisit the key education items that were included in the Governor’s plan.
Foundation Formula: The Governor’s recommendation includes flat funding for the Foundation Formula as compared to the appropriated level for our current school year. Flat funding amounts to approximately $190 million below the amount requested by DESE for full funding.
The increase in formula costs is largely driven by legislation passed in recent years, including:
- Increased reimbursement for virtual school providers
- Changes to charter school funding
- School calendar incentive payments
- The transition from Average Daily Attendance (ADA) to a blended student count model partially based on enrollment
It is important to note that these items are not separate funding categories within the formula itself. Under current statute, if the formula is not fully funded, the only mechanism available to account for that shortfall is proration of the State Adequacy Target (SAT). We are continuing to analyze what impact this shortfall may have on the SAT moving into the 2026-27 school year.
Transportation: The Governor’s proposal calls for transportation funding to return to FY25 levels, eliminating the $15.2 million increase provided for the current fiscal year.
Given the rising transportation costs districts are experiencing, this recommendation would leave transportation funding approximately $35.7 million below current need. If funding is not restored during the legislative process, transportation reimbursement could be prorated for the first time in several years during the 2026–27 school year.
Minimum Teacher Salary Grants: The Governor’s recommendation includes full funding for the minimum teacher salary grants, which is projected to be sufficient to support the program during the 2026–27 school year.
Career Ladder: The proposal includes flat funding for the Career Ladder program, which is expected to be enough to fully fund the program for the upcoming fiscal year.
Small School Grant: The budget includes $30 million for the Small School Grant, representing full funding of the program.
Proposition C (School District Trust Fund): The Governor’s budget assumes $1.306 billion in Proposition C revenue, the same level used in the current year’s budget.
Because Proposition C is funded through a one-cent statewide sales tax that flows directly to school districts, the amount reflected in the state budget is only an estimate. Actual funding will depend on sales tax collections throughout the year.
Open Enrollment: The Governor’s original proposal included $7.5 million for open enrollment, even though this funding was not requested by DESE and details about how the funding would be implemented were not provided.
The House Budget Chairman has removed this funding from the House budget proposal, meaning the current House budget draft does not include the $7.5 million appropriation for open enrollment.
ESA / Voucher Funding: The budget also includes $60 million for the Empowerment Scholarship Account (ESA) program, which represents a $10 million increase over the $50 million appropriated for the current fiscal year.
It is important to note that litigation challenging the constitutionality of this funding is currently pending. The lawsuit was filed by the Missouri National Education Association, and there is currently no timeline for when the courts will resolve the case.
What's Next: The House Budget Committee will spend the week reviewing and potentially modifying these recommendations during the markup process. Once that process is complete, the budget will move to the House floor for debate and approval, likely shortly after the legislature returns from spring break, before moving to the Missouri Senate for further consideration.
House Set to Debate Income Tax Replacement
Another issue expected to receive attention in the House this week involves proposals to restructure Missouri’s tax system. It had been reported that the Missouri House could debate HJR 173 & 174 last week. That did not come to fruition, and instead the House is expected to consider the measures this week.
HJR 173 Summary
HJR 173 Bill Text
These resolutions would begin the process of shifting Missouri away from the individual income tax and toward a system that relies more heavily on sales and use taxes. The proposal represents a significant priority for several leaders at the Capitol, including Governor Mike Kehoe and House Speaker Jon Patterson, and the anticipated floor debate represents the next step in advancing that priority through the legislative process.
We are continuing to monitor this proposal closely. The measures have generated significant attention at the Capitol and there is considerable opposition from numerous organizations and stakeholder groups across the state.
It is also important to note that several exemptions that have been discussed publicly in recent weeks—such as exemptions related to home purchases, agriculture, and healthcare—are not currently included in the language of the resolution.
Because the proposal is still early in the legislative process, it is widely expected that the measures could undergo significant revisions as they move through the House and, if approved, later in the Senate.
Members should also remember that any constitutional amendment approved by the legislature must ultimately be placed on the statewide ballot and approved by voters before it can take effect. We will continue monitoring developments as debate begins in the House this week.
Property Tax Update: HB 2780 Passes House; Attention Turns to HB 2668
Last week the Missouri House took up the two major property tax bills we highlighted previously. After significant debate, HB 2780 was passed by the House and now moves to the Missouri Senate for further consideration.
As we noted last week, the version of HB 2780 debated on the floor was a scaled back version of the earlier proposal after the bill had been returned to committee. Several of the most problematic provisions were removed during that process. However, the bill still contains one provision that raises significant concerns for school districts.
Most notably, HB 2780 reduces the minimum operating levy required to receive certain foundation formula aid from $2.75 to $2.20 beginning in the 2026–27 school year. This change carries long-term structural implications for school funding and could affect districts’ ability to access full foundation formula support.
Now that the bill has passed the House, that issue will need to be addressed in the Missouri Senate, where further revisions to the legislation are possible as the bill continues through the legislative process.
While HB 2780 now moves to the Senate, attention should remain focused on HB 2668, which remains on the House calendar and contains many of the provisions that were removed from the earlier version of HB 2780.
Summary of HB 2780
Text of HB 2780
Fiscal Note of HB 2780
HB 2668 — Omnibus Property Tax Reform
HB 2668 now represents one of the most extreme property tax reform measures still under consideration in the Missouri House. Nearly every problematic provision removed from the earlier version of HB 2780 appears in the latest version of this bill. Those provisions include:
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Requires most property tax proposals by political subdivisions to be submitted to voters only at the November general election. Township governments may continue using April or November elections.
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Prohibits political subdivisions and election authorities from advertising or describing a proposed property tax as a “no tax increase” proposal, except in limited circumstances.
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Requires property tax ballot measures to be labeled numerically or alphabetically only.
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Beginning January 1, 2027, standardizes property tax ballot language and requires proposed taxes to be expressed in specified dollar amounts based on property type.
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Requires political subdivisions that receive revenue from tax abatements or similar economic incentives to reduce their real property tax levy by the amount of revenue received from those abatements.
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Expands and clarifies property tax credit requirements in certain counties and limits annual increases in eligible credit amounts to the lesser of 5 percent or inflation in certain counties.
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Institutes the senior citizen property tax freezes from SB 190 on every county in the state.
We remain opposed to HB 2668 in its entirety. Members are strongly encouraged to continue reaching out to their State Representative and urge opposition to HB 2668.
Summary of HB 2668
Text of HB 2668
Fiscal Note of HB 2668
Open Enrollment Continues to Loom in Senate
Last week we reported that SB 971 had been placed on the Senate calendar and was eligible for floor debate. Since that time, the bill has been moved from the formal calendar to the informal calendar, meaning the measure could be brought up for debate at any time in the Senate.
The bill has been modified to resemble versions of open enrollment proposals that have passed the House in recent years.
In addition to the broader concerns about the impact open enrollment would have on Missouri schools and students, we remain particularly concerned about the provision in this year’s proposal that allows charter schools to accept open enrollment students from other school districts.
Open enrollment proposals are often framed around expanding options for individual students. While there may be benefits for some families, the broader system-wide impact must also be considered.
When a student leaves a resident district, the state funding attached to that student leaves as well. However, fixed operational costs remain. Enrollment losses are typically spread across grade levels, making staffing adjustments difficult. As a result, districts may be forced to reduce programs rather than personnel, limiting opportunities for students who remain.
Open enrollment also creates enrollment volatility that complicates long-term financial planning. Districts may be required to hold larger reserves to manage swings in student population, limiting their ability to invest in staff or programming. Transportation obligations, community engagement dynamics, and special education compliance considerations further increase the complexity of effectively implementing open enrollment in the state.
We will continue to keep our ear to the ground regarding when the bill may be brought up for debate and will provide updates as the situation develops. Members are encouraged to continue communicating their opposition to open enrollment proposals with their State Senator.
Summary of SB 971
Bill Text of SB 971
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