Missouri Session Outlook

By The Policy Stack

Governor Kehoe and Legislative Leaders Set FY27 Revenue Baseline Amid Tightening Fiscal Outlook

Governor Mike Kehoe, joined by Senate Appropriations Chairman Rusty Black and House Budget Chairman Dirk Deaton, has officially announced the Consensus Revenue Estimate (CRE) for State Fiscal Year 2027 (FY27). This agreed-upon figure sets the hard cap on general revenue spending for the upcoming legislative session.

While the state anticipates modest growth, the projections reflect a tightening fiscal environment driven largely by recent tax policy changes.

By the Numbers

The consensus estimate projects net general revenue collections of $13.65 billion for FY27. This represents a projected 3.8% growth over the revised estimate for the current fiscal year (FY26).

However, despite this year-over-year growth, the outlook is more constrained than in previous budget cycles. The primary driver is the phased-in impact of recent tax reductions—most notably the elimination of the corporate income tax and the recent capital gains tax cut—which have effectively lowered the state’s revenue baseline.

The Spending vs. Revenue Debate

The administration has framed these tighter margins not as a revenue failure, but as a spending challenge. In a statement accompanying the release, Governor Kehoe emphasized that "spending, not revenues, is the problem facing state government."

While Missouri continues to hold healthy cash reserves—bolstered largely by pandemic-era federal surpluses—those one-time funds are being drawn down. Consequently, the FY27 budget process is expected to feature:

Enhanced Scrutiny: A rigorous review of existing line items.

Potential Reductions: Possible cuts to state spending to align with the lower revenue trajectory.

Fiscal Discipline: A strong push from leadership to avoid using one-time reserves for ongoing operating expenses.

What’s Next: The State of the State

Governor Kehoe will formally kick off the legislative session with his 2026 State of the State Address.

Mark your calendar for Tuesday, January 13, 2026 at 3:00 p.m. for the address. The address is scheduled earlier in the month than is typical as of recent years, a likley strategic move intended to give the General Assembly more runway for the appropriations process.

The Big Picture: Income Tax Elimination

The most significant policy development to watch during the address is the Governor's anticipated roadmap for eliminating Missouri’s personal income tax.

Despite the tighter revenue estimates for FY27, Governor Kehoe is expected to unveil a long-term plan to phase out the tax entirely. With the income tax currently accounting for a significant portion of the state’s general revenue, this proposal will likely dominate the legislative debate, forcing a showdown between proponents of aggressive tax relief and those concerned about long-term fiscal stability.

Prefiled Bills

There are currently 1,665 prefiled bills for 2026, with tax issues leading the key bill topics. Republicans lead the majority of sponsored bills.