The largest budget in Missouri history was approved Thursday, with money going toward infrastructure improvements and raising teacher salaries. But one of the most anticipated items — $500 million for a Missouri tax rebate to people who paid state income taxes in 2021 — was ultimately vetoed by Gov. Mike Parson. The measure introduced in late April was designed to curb inflation by sending money to tax filers, sponsors said.

Parson vetoed the tax rebate proposal alongside 32 other measures, totaling nearly $644 million in rejections.

In his veto letter to the legislature and secretary of state, Parson said the legislature did not outline proper language authorizing the state to use the funds. Therefore, Parson said, spending the money without the necessary written directive in the bill would violate parts of state statute. Individual income filers would have received up to $500 in a Missouri tax rebate under the plan, while joint filers would have received up to $1,000. 

In a statement released by Parson’s office Friday afternoon, the governor said he is planning to call a special session of the legislature to address a form of permanent relief to income taxpayers in Missouri, not just a one-time stimulus. 

“We have managed our state resources responsibly and our consistent investment in workforce development and infrastructure is providing a strong foundation for Missouri. Now is the time to take additional steps to help alleviate the strain on Missouri families. Permanent tax cuts that provide real relief to families, senior citizens, the working class, and small businesses every year is a better answer to the inflationary pressures we face, and we look forward to getting it done,” Parson said in the statement. 

Parson’s plan includes reducing the individual income tax rate, increasing deductions and allowances for taxpayers and further simplifying the tax code, to create the “largest tax cut in state history,” according to the release. 

Under the proposal, the first $16,000 of income for single filers, or $36,000 for joint filers would not be taxed at all, according to a release about the proposal from the Missouri Republican Party.

Other vetoed spending items include $83 million for the planning, design and construction of a Highway Patrol Law Enforcement Academy. Parson said the cost could not be approved because the actual project was significantly more expensive than the proposed $83 million allocation. He also vetoed $10 million from the state’s lottery fund for charter school maintenance. 

The final budget totaled over $47.5 billion, including $12.5 billion in general revenue. Federal coronavirus relief dollars bolstered Missouri’s spending power for the 2023 fiscal year, leading to an expansion of some state programs. 

Parson approved funding to raise starting teacher pay and to fully fund the state’s public school transportation model for one year. 

The budget also includes $411 million for drinking water, wastewater, stormwater and lead line projects in Missouri. 

Sen. Dan Hegeman, a Republican from Cosby who chairs the Senate Appropriations Committee,  said the budget has given the state opportunities for increased investment. 

“We’ve had the opportunity to do some very transformative changes all across the state, in every section, almost every county in the state,” Hegeman said of the record-breaking budget. “The ability to apply for grants to deal with water, wastewater and broadband expansion across the state. A lot of higher education improvements to do some transformative projects in those communities.” 

A number of capital improvement projects were funded as well, including $30 million in federal funds for improvements to National Guard buildings across the state and $22 million for improvements to the state’s parks. 

New funding for schools

The fully funded transportation model is a win for school districts, which for years have been picking up more of the transportation costs. Lawmakers said this one-time opportunity was made possible by the abundant state budget this year, where extra federal dollars allowed more flexibility with state funds. 

Missouri is able to reimburse school districts up to 75% for their transportation costs, but the provision hasn’t been fully funded for decades. The state’s extra dollars this year in part went toward the one-time $214 million allocation to reimburse districts. 

The state also set aside $3.6 billion to fully fund the K-12 foundation formula, the funding model that determines how much the state will spend on K-12 education. The governor also approved $21.8 million to partner with school districts to increase starting teacher pay to $38,000. 

American Rescue Plan Act money set aside for infrastructure

The American Rescue Plan Act (ARPA), which has paid billions out to states over the past two years to aid in coronavirus recovery, was mostly set aside for infrastructure and public health and safety spending across the state. 

About $460 million of Missouri’s $2.6 billion in ARPA funds were allocated for improvement projects at the state’s universities. Other projects funded include:

• $411 million to upgrade the state’s water infrastructure;
• $250 million to expand Missouri’s broadband infrastructure;
• $30 million for workforce development;
• $30 million for a grant program for emergency medical services, fire departments and public safety agencies to address equipment, training or technology needs.

The ARPA dollars would have paid for the tax credit proposal. 

Investments in economic development and public safety

Parson approved $216 million in federal funds for one-time expenditures for emergency rental assistance. Another $49 million in federal funds and one staff position were also created for grants to provide broadband access in underserved areas. 

About $4.1 million and two staff positions were also approved for the administration of a body camera program for Capitol Police and the Missouri State Highway Patrol. 

Other public safety spending includes: 

• $80 million to the State Emergency Management Agency to fund disaster assistance grants associated with the coronavirus;
• $39 million to support veterans homes across the state; 
• $56.5 million to cover settlement and overtime costs, including nearly $7 million in general revenue; and
• $4 million in spending for the state’s Opioid Addiction Treatment and Recovery Fund. 

The governor vetoed $1 million for a medication-assisted drug treatment program.