KANSAS CITY, Mo. — Earlier this year, Missouri Gov. Mike Parson cut roughly $1 billion from the state budget, including millions for Kansas City-area highway work, health care and civic groups, frustrating local leaders and lawmakers.

Gov-elect Mike Kehoe will soon confront similar choices.

BoysGrow, which operates a Kansas City-area farm where youth learn about agriculture, business and life skills, was set to receive $50,000 until Parson vetoed the spending – one of a number of projects around the metro that were cut.

“It was disappointing … when the money did not get allocated the way we thought it was going to,” BoysGrow executive director John Gordon, Jr. said. “With the new governor, we’re excited for new opportunities. We will be applying for the funding again.”

Missouri’s incoming governor will release a budget proposal in two months, his first opportunity to demonstrate his approach to state finances compared to his fellow Republican. After the General Assembly approves a budget in the spring, Kehoe will then choose whether to line-item veto specific spending – and by how much.

Parson approved a series of growing budgets during his time in office. Overall spending expanded from roughly $27 billion to more than $50 billion, driven in part by strong tax collections and a massive haul of federal pandemic aid, more than $14 billion in total. Parson signed off on large capital investments, including nearly $3 billion to expand Interstate 70.

But the outgoing governor also pared back budgets passed by lawmakers. Parson took his veto pen to dozens of individual spending items across the state – including in Kansas City – that could in some cases have been transformative for organizations and programs that he dubbed “pet projects.”

This year alone, Parson cut $19 million in funding to Kansas City area organizations and entities, with several major projects also losing funding totaling at least $41 million. They included cuts as large as $23 million to local highway projects.

Without the boon of federal pandemic aid, Kehoe will have to navigate the emerging new, more sober spending reality, weighing demands for resources against financial constraints and calls for additional tax cuts.

“The budget is going to be tough the next couple of years,” Kehoe said during a September debate.

‘Not certain what to expect’

Lawmakers, civic activists and nonprofit leaders are now anticipating the looming Kehoe administration with a mix of trepidation and cautious optimism. The budget wasn’t a central focus of the gubernatorial contest, and Kehoe made no sweeping public promises regarding budget cuts – but did vow to pursue eliminating the state income tax, which generates more than $8 billion a year to pay for state government.

“The governor-elect and the transition team are actively working through the state budget now,” Kehoe transition spokeswoman Gabby Picard told The Star on Thursday.

At the September debate, Kehoe said the budget had grown too much and appeared to acknowledge the state’s changing financial situation.

“We’re going to see some tougher times on the horizon ahead and I know for a fact we’re going to want somebody in the governor’s office who understands what budgets are about and what hard decisions are about,” Kehoe said.

An immediate challenge for the Kehoe administration will be a mid-year adjustment to the budget to fund state agencies this year, partly due to an expensive new education law. A supplemental budget proposal could total hundreds of millions.

Kehoe told reporters earlier this month that he was already having conversations with Parson’s administration and lawmakers about what that would look like.

“I don’t have an exact number on it now, but we’ll be sure that’s coming together very quickly,” he said.

Some expect Kehoe to maintain the overall tone and sensibility of the Parson administration. Last week, Kehoe announced he plans to retain Parson’s budget director.

Democrats in recent years reacted relatively warmly to elements of Parson’s budget proposals, including a focus on highways and bridges, but have voiced disappointment when he line-item vetoed local projects.

“I’m still not sure what to expect from the Kehoe administration, if I’m being honest,” incoming House Minority Leader Ashley Aune, a Kansas City Democrat, said. “Partially because I believe him to be someone who is open to having conversations about maybe some of the projects that folks on my side of the aisle are more likely to fight for.”

Aune said that while she anticipates being able to negotiate budget priorities with Kehoe, she cautioned that ending the state income tax would dramatically affect the state’s general revenue and, by extension, Missouri’s ability to invest in the “sorts of programs and ideas that we are fighting for.”

“So I’m still just not certain what to expect,” Aune said,”but I’m interested to see how these next several months go.”

A tighter financial picture

While the specifics of Kehoe’s spending plans remain unclear, the incoming governor has repeatedly promised to pursue ending Missouri’s income tax.

A Kehoe spokesman previously called ending the tax a “priority” and his campaign said he was working with the conservative economist Art Laffer, who advised former Kansas Gov. Sam Brownback as he championed income tax cuts that spurred a budget crisis in that state.

During the September debate, Kehoe said ending the income tax must be done responsibly.

“You have to get it to a point where you’re not affecting essential services and education,” Kehoe said.

Kehoe’s vision will run into Missouri’s new, constrained financial outlook.

Missouri has been rapidly depleting its ending balance, effectively using cash reserves to finance spending above what the state is collecting in revenue.

The state is spending nearly $4 billion of its reserves this budget year. It is expected to end the current budget year with a roughly $1.9 billion ending balance, down from $5.7 billion a year ago, according to budget documents from the governor’s office.

The state is expected to have $13.3 billion in general revenue during the current budget year but is slated to spend $15.3 billion on general revenue obligations, with an additional $1.8 billion in American Rescue Plan Act expenses, according to the budget documents.

The influx of pandemic-era federal dollars “really did mask the impact of the underlying budget situation,” said Traci Gleason, a spokeswoman for the Missouri Budget Project, which conducts financial research and analysis.

COVID-era federal funding helped boost the budget and obscure the effects of previously-approved tax cuts, Gleason said. In 2022 the General Assembly passed a bill that lowered the top state income tax rate from 5.3% to 4.95% in 2023.

The bill, signed by Parson, also mandated that if Missouri experiences revenue growth, the rate would drop to 4.5% when the plan is fully implemented in five years. Parson said it was the largest income tax cut in Missouri history.

“I think from a legislative perspective, it seemed as though we were more flush than we were because of those temporary pots of funds,” Gleason said.

Incoming Senate President Pro Tem Cindy O’Laughlin, a Shelbina Republican, said the pandemic funds were generally used for one-time services or investments.

“The fact that the money is coming to an end has been planned for,” O’Laughlin said in a statement.

What a tight budget could mean for KC

Even as Missouri’s budget outlook begins to shift, Gordon, the BoysGrow director, remains optimistic about Kehoe.

The $50,000 that Parson vetoed would have created more opportunities for vocational training and mentorship, Gordon said. BoysGrow serves about 200 youth a year with a full-time staff of five and a seasonal staff of about 20.

Gordon called the veto disappointing but plans to seek the funding again. He called the budget process a “big machine” with lots of worthy organizations vying for dollars, but that he had anticipated BoysGrow would have made the final cut.

“From my understanding, the new governor has an interest in kids, in youth … providing opportunities for kids who might not have the most opportunities,” Gordon said.

Kehoe, 62, was raised by a single mother in St. Louis and doesn’t hold a college degree. He helped turn around a van conversion company in his 20s before becoming a car dealer in Jefferson City. He was first elected to the Missouri Senate in 2010, and Parson appointed him as lieutenant governor in 2018.

But Kehoe and lawmakers will face more pressure this coming year to limit overall budget growth, as well as the kinds of targeted spending projects that Parson previously vetoed.

“I think the governor will work with the House and Senate and try to help with the priorities as much as he can, but he is constrained by the revenues that we have,” said House Majority Leader Jonathan Patterson, a Lee’s Summit Republican who will likely become the next speaker.

“So I think he’ll definitely work with the House and Senate, but he will also have to take into account the budgetary realities and that revenues might not be as strong as they have been.”

Kansas City lawmakers and leaders are still expected to pursue funding opportunities, especially related to public safety and the World Cup.

Kehoe promised a focus on combating crime during his campaign – a priority that’s of keen interest to officials in Kansas City, which has experienced record and near-record numbers of homicides in recent years. So far in 2024, 136 people have been killed in the city; 185 were killed in 2023.

The Kansas City Police Department, like many other police agencies, has struggled with officer vacancies. While Kansas City funds the department, the police force is under state control, governed by a board of police commissioners.

Kehoe hasn’t detailed his crime plan, but has stressed the importance of recruiting and retaining law enforcement officers, harsher criminal penalties for drug dealers and ensuring law enforcement agencies have the “necessary tools” to keep residents safe.

Kansas City Mayor Quinton Lucas, who spoke with Kehoe in the days following his election, said during a recent Facebook Live broadcast that Missouri “needs to be helpful” on public safety. He noted that lawmakers had approved funding for new Highway Patrol facilities and said the city could use the same support.

Kansas City needs more support in terms of bolstering police investigations and “more bodies” – a reference to more law enforcement personnel.

“The place that we need to get better is on safety,” Lucas said.

The World Cup is coming

Kansas City is also preparing to host World Cup matches in the summer of 2026, an enormous undertaking that will test the public safety and transportation capabilities of the metro area. KC2026, the organization spearheading the hosting effort, has a total budget of over $100 million.

Missouri lawmakers have already committed nearly $70 million for World Cup efforts, including stadium modifications, parking and overall organizing. Some Kansas City area lawmakers are expected to seek more.

Transportation remains a top concern of organizers. No rail transportation exists between Kansas City International Airport and downtown, or for that matter Arrowhead Stadium, where matches will be played.

Local World Cup organizers have said they will have a temporary transit fix in place by tournament time to transport soccer fans in June and July of 2026 but that likely won’t include rail. The plan will instead almost certainly rely on more buses – at least 200 need to be leased – along with coordination between rental car, ride-share and taxi companies.

“When it comes to Kansas City, obviously we are looking for some significant funding for transit,” said Sen-elect Maggie Nurrenbern, a Kansas City Democrat who is currently a state representative.

“We’ll be seeing unprecedented crowds descending on our state here for the World Cup,” she said, “and we’ve got to make sure that we not only are able to host well during that time, but then we have that groundwork and the infrastructure laid out for what will be good for our state and our citizens moving forward, right?”

Nurrenbern said implementing light rail from downtown to the airport for the World Cup is cost prohibitive. Still, she said high-speed and direct shuttles that connect to other sources of public transit is a possibility.

“But that takes time, and that takes money, and it takes planning and having the right people there,” Nurrenbern said.

“And I think Gov. Kehoe understands that – that in order to, you know, really continue to build jobs and keep people in Missouri, and get new people to move and new businesses to move to Missouri, we have to put our money where our mouth is and invest in these things.”

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