At first glance, it seems like Missouri’s state general revenue has fared well through the pandemic. However, much of state revenue growth can be attributed to Missouri’s delayed tax deadline and earlier federal COVID relief that is now expiring. Assessed in the context of these dynamics, general revenue is not as healthy as it may initially appear.
Missouri Office of Administration recently reported that state general revenue has grown by an astounding 25 percent for the current budget year compared to the previous budget year. That’s an increase of $750 million in the first 4 months of the 2021 Fiscal Year (July 2020 – October 2020).[1] However, much of that increase results from Missouri’s decision to move the tax filing deadline at the start of the pandemic. Delaying the tax deadline from April to July effectively shifted the tax filing from state Fiscal Year 2020 to Fiscal Year 2021. As a result, as much as $700 million of the current year’s growth is really revenue from last year. Once removed from the total, revenue in the current year has only grown by $50 million compared to the same timeframe last year – a rate of 1.6 percent.
In addition, actions that the Congress took in response to COVID have temporarily boosted personal income in Missouri, which is also helping to stabilize revenue. These actions included stimulus payments, pandemic unemployment assistance and the PPP loans. As documented by the Federal Reserve Bank of St. Louis, total personal income in Missouri grew by over $20 billion in the second quarter of 2020.[2] This growth was well above the average growth rate, which hovers closer to $2 billion, and is likely largely attributable to the infusion of Congressional funds for Missourians. With the increased personal income being spent in Missouri’s economy, state tax revenue was stabilized. In other words, the actions Congress took are working as intended – they have provided significant help for individuals and stabilized the economy.
But nearly all of those actions are expiring at the end of this year.
- Without Congressional action on an additional and robust COVID relief package, personal income will flatline and Missouri’s economy will tumble.
- That would result in a steep decline in state general revenue – and certainly end in significant cuts to critical public services.
- For each cut to the state budget, more jobs will be lost – teachers, social workers, public health workers and others will join the ranks of the unemployed, making our recovery even more difficult.
[1] See “State Releases October 2020 General Revenue Report”, November 9, 2020; retrieved on 12/2/20 from https://oa.mo.gov/commissioners-office/news/state-releases-october-2020-general-revenue-report
[2] Federal Reserve Bank of St. Louis and U.S. Bureau of Economic Analysis, Total Personal Income in Missouri [MOOTOT], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/MOOTOT, December 2, 2020.
