Gov. Mike Kehoe’s request for $50 million in state funds for MOScholars was hotly discussed during legislative session, and if funded, sets up future debates
BY: ANNELISE HANSHAW
Missouri Independent
Gov. Mike Kehoe’s first budget proposal launched a tug of war between public-school advocates and those hoping to use state funds for private education. Both sides ultimately came away with what they wanted — but neither expects this to be the final showdown.
State Treasurer Vivek Malek, who oversees the state’s tax-credit scholarship program, told The Independent in an interview last week that he expects to more than double the number of scholarships administered by MOScholars in the upcoming school year.
Those students would have a “reasonable expectation,” he said, to be funded through graduation. And if donor funds continue to come up short, state funds would be required to support them.
In January, Kehoe laid out a budget that did not fully fund public education while giving state funds for private-school scholarships.
His request cut back $300 for the formula that determines state aid for public schools, contrary to the state education department’s recommendation. But he added a $50 million appropriation to the State Treasurer’s budget to help fund private-school scholarships through the MOScholars program. This windfall was not part of the treasurer’s initial request.
“The governor made a policy or a budgetary decision to invest in one form of education and not fully invest in the other,” said state Rep. Betsy Fogle, a Democrat from Springfield and ranking minority member of the House Budget Committee.
The House kept the governor’s recommendations, and the Senate flipped the two priorities: restoring full funding to public schools but axing the $50 million for MOScholars.
In May, state lawmakers reached an agreement to fund both and are awaiting the governor’s signature.
But the infusion of funds to MOScholars is likely to create more need in the program.
Malek said he expects to use the $50 million to offer more scholarships than the current pot of donations could provide. There are 6,000 students ready to participate in the upcoming year, and he expects more to sign up. This past year, 2,700 students received scholarships.
Malek hopes to make MOScholars self-sufficient, with enough donations to meet demand. But until then, he will request funds to, at a minimum, sustain aid for students already enrolled.
“I’ll be working through the years to make sure the tax credits are still utilized and nobody is depending on a direct appropriation from (general revenue),” he said.
Fogle told The Independent that the $50 million did not appear to be a one-time request.
“The $50 million that was put in general revenue was done, in part, because the tax credit program wasn’t very popular, and donors weren’t giving to that,” she contends. “And the governor wanted to figure out another solution to privatizing education.”
MOScholars currently operates through taxpayer-directed spending, where state funds are given to scholarship organizations through donations that receive a 100% tax credit. The program has faced issues funding scholarships each fall with the majority of donations coming at the end of the year.
An additional $50 million — more than double the amount of donations received last year — would solve the funding lag, Malek said.
“Our calendars were misaligned, so now we will be opening (enrollment) up for next year, starting early in the fall so that people can sign up for next year’s academic school year,” he said. “This will give us the flexibility of doing that, which was not possible before.”
The program has a $75 million expandable cap thanks to a large education package passed last year.
State Rep. Stephanie Hein, a Springfield Democrat, said during debate in April that she wondered why the legislature expanded the donation limit from $50 million to $75 million when there have been $23.4 million in donations in 2024.
In 2023, donations totaled $16.6 million.
“Donors just are not that excited to give to this program, even at a 100% tax credit,” she said.
The program is in its infancy, with just three years of scholarships completed. The increased funding could help grow MOScholars to meet outsized demand — or it could create dependency on general revenue.
Hein said this problem would be exacerbated by tax cutbacks planned by Republican state lawmakers.
“We are setting a precedent,” she said. “And if we eliminate state income taxes, tax credits go away and we are going to be on the hook with (general revenue) to cover this program.”
Even if the appropriation is signed by the governor, it might face legal challenges as some question the constitutionality of using general revenue for MOScholars.
The 2021 law that established MOScholars prescribes that scholarships are funded by tax-deductible donations to educational assistance organizations, which are nonprofits that apply to administer the scholarships.
But 2% of donations are directed to an account dubbed the “Missouri Empowerment Scholarship Accounts Fund” overseen by the Treasurer’s Office. The fund is “to be used by the state treasurer for marketing and administrative expenses or the costs incurred in administering the program.”
Some believe the law does not authorize the program to use general revenue. Fogle expects legal “challenges that argue that directly appropriating tax dollars to private schools is unconstitutional.”
“The direct appropriation of general revenue is a completely different foundation than the tax credit,” she said. “There are people on both sides of the aisle, whether they’re voting in favor of it or not, who have considerable doubts and concerns.”
Malek did not speculate on the possibility of a lawsuit.
“We will deal with it and when that happens, we will defer that to our general counsel, the attorney general,” he said. “I cannot predict which course it will take.”
Malek says MOScholars is “another tool” for educating children, in addition to the public school system.
“I don’t see why people would be nervous. This is not taking away any funding dollars from our traditional educational institutions,” he said.
As State Treasurer, Malek was not part of the governor’s decision on public-education funding and considers himself a “big proponent of public schools.”
“My focus was just for the MOScholars program,” he said. “We need some help to strengthen this program… and I’m glad that need was listened to.”