Return to Headlines

Missouri School Finance and Investment Market Updates

Article Sponsored By:


As the stewards of public funds and leaders of school district budgets, it’s important for school finance officers to be well-informed of both national economic trends and state-level school finance updates. The Missouri Capital Asset Advantage Treasury (MOCAAT) team keeps constant watch on both and are here to keep you informed and help you navigate your district’s financial future.


Economic Outlook

With the Fed on hold and the tightening cycle likely complete, the forward-looking return outlook for the bond market has improved. Yields, while well off recent cycle highs, remain attractive relative to both history and forward-looking economic indicators. The yield curve has made significant progress toward normalization following the recent under performance of long-term rates versus short-term rates, further improving market prospects across the curve.

Bloomberg U.S. Aggregate Quarterly Return vs. 10 Year Yield


Although the Fed remains cautious about inflation progress and is still leaning hawkish, the market will continue to attempt to move ahead of the Fed, thus forward pricing can iMAGE 2be volatile and may overshoot the path of policy rates. This is very typical for this part of the Fed cycle and highlights the importance for investors to remain focused on objectives and proper time horizons. Although the yield curve is still relatively flat to inverted, high real and nominal yields offer attractive opportunities to position for longer liabilities. As we emphasized this summer, history in the bond market has shown many times that an inverted yield curve can be a false inducement to invest shorter than appropriate late in the cycle, setting up significant reinvestment risk misalignment. Market adjustments could continue to be sharp, as we have recently witnessed.


Missouri State of the State Address

State Adequacy Target (SAT), Transportation Formula, Prop C, Baseline Teacher

Grant, Career Ladder

The headline from the Governor’s State of the State Address on January 24th was full funding of the foundation formula, transportation formula, career ladder and the extension of the Baseline Teacher Salary to $40,000. All of this is exciting news and a great first step toward much needed increased education funding for FY25.

A less talked about portion of the Governor’s proposed budget is the proposed increase in the appropriation for Prop C for FY24 and another increase for FY25.

Prop C is a dedicated revenue stream that can only be used for distribution to K-12 education, but DESE can only distribute what has been appropriated. The current FY24 appropriation is only 0.5% higher than the FY23 appropriation and DESE estimated the $/PY-WADA to be $1,374. This appears to be an extremely low number given the fact that sales tax statewide through 1/29/24 is 11.65% higher than FY23.

The Governor is proposing an additional $86 million for Prop C, which, if approved by the legislature and the revenue continues at the current rate, would increase the $/PY-WADA to $1,473 for FY24. Keep in mind that this new appropriation is 8% higher than last year while sales tax is currently 11.65% above the prior year.

The Governor’s budget also has an increase in FY25 Prop C of $33 million. This means the FY25 appropriation is only 10.57% above the FY23 appropriation. This seems like a reasonable amount at this time considering FY24 is already 11.65% higher than FY23. If this comes to fruition, that would mean a $/PY-WADA of $1,513 for FY25.

PROP C with Updated Data for FY24 & FY25 from Governor’s Budget


This is very early in the budget process but a great first step. Please continue to monitor the budget process through the first Friday in May. In the words of the great Gerri Ogle (Former DESE Deputy Commissioner), “Be as conservative or pessimistic as you want to be with this information.”


A person in a suit and tieDescription automatically generated with medium confidence

Jason Hoffman
Vice President, Investment Services
PMA Financial Network, LLC


A person wearing a suit and tieDescription automatically generated with medium confidenceJohn Jungmann
Vice President, Investment Services
PMA Financial Network, LLC