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Florida’s New Long-Range Financial Outlook: Thinking About the Budget Outside the Box

Terry Golden
September 2017

The Florida Legislature has adopted its long-range financial outlook for the next three years, based on projected revenues and expenditures for that period. Although the projection for the coming year includes an insignificant surplus (for state budget purposes) of $52 million, the projection for the latter two years shows a shortfall of more than $1 billion per year. These figures do not include the state fiscal impacts of Hurricane Irma.

We fully expect that legislative leadership will exhort its members to cut the budget in anticipation of the shortfall. Instead, they should explore a variety of options. State services have not fully recovered from the recession, even though the population has grown and increased the need for these services. The result is diminished support for critical state needs, either in quality or quantity. In some cases, eligibility requirements for human service programs have tightened or lengthening waiting lists have developed.

Cutting funding is no longer the answer. Floridians who qualify for public services should be able to access those services without jumping through needless hoops. School children deserve a real investment in public schools. People with health issues should have high-quality health care available. The physical environment, especially in the wake of Hurricane Irma, presents pressing needs. No Floridian should go hungry.

So, what’s a Legislature to do? Fortunately, there are other options available.

Lawmakers could re-examine the current tax preferences in statute. Excluding exemptions available to all Floridians, like the sales tax exemptions for groceries and medications, the state loses about $12 billion annually in other exceptions to the tax code. Unlike appropriations, which are reviewed annually, many tax preferences are enacted without subsequent review or discussion. They exist in perpetuity. When there is a need for additional revenues, the governor and Legislature should undertake cost benefit analyses of these measures and prioritize them against other budget priorities.

Lawmakers are planning on earmarking another $1 billion in the 2018 budget for reserves. Article III, Section 19 of the Florida Constitution requires to the Legislature maintain 5 to 10 percent of General Revenue Funds in reserve. Current reserves of almost $2.9 billion represent 7.5 percent. An additional billion-dollar allocation would push the total reserves above the 10 percent cap. Legislators could consider reducing or eliminating the funding allocated for reserves in the coming year.

Lawmakers could also consider maximizing federal matching programs. For example, under Medicaid expansion the state would gain hundreds of millions in additional federal funding. While Florida would have to fund 10 percent of these programs, the savings that would accrue to the state’s general fund from expansion would more than make up for the state’s share of expenditures.

The Florida Senate and House have a responsibility to pass a balanced budget each year. There are a variety of means to achieve this end. Lawmakers should examine alternatives beyond budget cuts if the projected shortfalls materialize.

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