Kehoe outlines 2027 budget with $600M in cuts
JEFFERSON CITY, Mo. (KMIZ)
Republican Gov. Mike Kehoe outlined his legislative priorities for the upcoming fiscal year during Tuesday's State of the State address, calling for significant budget cuts as Missouri confronts a looming fiscal imbalance.
Kehoe’s proposed budget includes about $600 million in cuts to the core operating budget, reducing total spending from $55.1 billion in fiscal year 2026 to $54.5 billion in fiscal year 2027.
Kehoe’s office said the proposal is intended to put the state on a more sustainable fiscal path, balancing the budget while emphasizing what it described as responsible stewardship of taxpayer dollars. The administration is seeking to address a projected long-term imbalance of more than $2 billion.
The state is projected to end the fiscal year with a surplus of $4.7 million, a sharp drop from the $8 billion in cash reserves recorded at the end of fiscal year 2023. It would also be the lowest year-end balance since fiscal year 2017, when the surplus totaled $5.1 million.
Since fiscal year 2022, Missouri has added more than 3,400 new budget items, resulting in roughly $13 billion in additional general spending. With federal COVID-19 relief funds expiring, Kehoe said during Tuesday's speech that he wants to return state finances to a pre-pandemic framework.
Education
Despite overall budget reductions, funding for education would remain intact under the proposal.
During the most recent legislative session, lawmakers approved the largest increase ever to the state’s school funding formula, bringing total funding to about $10 billion after a $500 million increase the previous year.
Kehoe’s 2027 budget does not reduce funding for the K-12 formula or higher education. However, the House Budget Committee has indicated that no additional education funding will be added this year.
Economic Development
A major component of Kehoe’s economic agenda is eliminating Missouri’s state income tax. The state’s current income-tax rate ranges from 2-4.7% and accounts for more than half of state revenue.
House Budget Committee members noted that Missouri’s tax structure reflects policy decisions made during the past century. Kehoe has said he wants a tax system designed to last the next 100 years.
If enacted, Missouri would join nine other states -- including neighboring Tennessee -- without a state income tax. However, analysts with the conservative group Americans for Prosperity said eliminating the tax would likely require expanding the sales tax to services or increasing sales tax rates. Kehoe has stated he wants sales tax to include certain services, and stated during Tuesday’s address that it would expand to include monthly subscriptions and digital services.
Democratic lawmakers have said they plan to offer an alternative proposal.
The budget also includes $17.7 million for Missouri One Start, a workforce training program focused on emerging technologies. Kehoe is recommending $63.2 million related to the FIFA World Cup, including funding for drone technology to support security. The state has included World Cup-related funding in each of the past two budgets because matches will be held during both fiscal years 2026 and 2027, according to the House Budget Committee.
Public Safety
Public safety remains a central priority in Kehoe’s fiscal 2027 proposal, with $2.3 billion allocated to the area.
That includes $1.3 billion for statewide disaster response; $14.7 million to help law enforcement counter illegal drone use; $10 million for Blue Shield grants supporting equipment and training for local agencies; and $7.7 million for criminal and forensic investigation equipment.
The proposal also includes $5 million for law enforcement scholarships and $1.25 million for Operation Relentless Pursuit, an intelligence-led initiative aimed at locating and arresting people with felony warrants.
Kehoe is also recommending $26.7 million for maintenance and repairs at veterans homes as part of $170.6 million in total spending on veterans services.
Agriculture
The governor’s budget recommends $67.2 million for agriculture, including $34.1 million to support rural routes across the state.
It also proposes $2.9 million for a cooperative agreement with the U.S. Department of Agriculture to support equipment and infrastructure investments for food producers and processors, as well as $2 million to address food security through the purchase of Missouri-grown rice.
Health Care
Kehoe’s health care proposal focuses on rural hospitals and Medicaid reform.
The budget includes $216.3 million for rural health transformation initiatives aimed at improving access to care through system upgrades and enhanced coordination.
Another $62.1 million is allocated for Medicaid reform, with the goal of improving staffing and program integrity to increase efficiency. The proposal also includes $8.3 million for substance use disorder treatment.
