BRADENTON, Fla. – Florida legislators face another record state budget, $1 billion in proposed tax cuts, and a new tribal gambling compact as they gear up for an earlier-than-usual annual session in January.
Gov. Rick Scott recommended a $79.3 billion spending plan for fiscal 2017 that also focuses on cutting taxes by $1 billion "to grow our manufacturing industry and help Florida small businesses while further diversifying the economy," he has said.
Less than six months ago, Scott signed the current $78.4 billion budget into law, marking the third straight fiscal year of record spending for the Sunshine state.
Since Scott signed the 2016 budget, separate environmental advocacy groups have continued to press two lawsuits challenging the Legislature's decisions in spending documentary stamp tax revenues collected on real estate sales.
The suits claim lawmakers diverted $237 million of the doc stamp revenues to pay for projects not intended by voters who supported Amendment 1 in 2014 in order to acquire and improve conservation and recreation lands.
Even if the environmentalists win the suits, the amount of money at risk is unlikely to upset the state budget as revenues continue to grow each year and support massive tax cuts such as those passed in recent years.
Scott, a Republican, may encounter resistance in next year's session to his current plan.
While the GOP-led Legislature has supported Scott's tax cuts in the past, some have questioned the proportion of his latest proposal versus funding of state priorities such as education.
Scott has insisted that to remain competitive taxes must be lower and that he also needs $250 million in funding to lure new business to the state in order to overtake Florida's number one competitor for jobs: Texas.
"I know there will be some critics who say we cannot afford to cut taxes by $1 billion while also creating a one-time $250 million trust fund for economic incentives," he said. "Our state's economy is growing by over 2.7%, which means our state general revenues are up by $1.3 billion.
"In fact, total general revenues exceed this year's recurring budget by $3.4 billion," he said.
Scott, who is debt averse along with fellow Republicans, has proposed a budget that spends most of the available cash and relies very little on bonding even though capacity is available.
On Tuesday, Scott and members of the elected state Cabinet learned that for the fourth consecutive year Florida will have adequate capacity to issue bonds under the state's policy guidelines.
That capacity is measured each year as the percent of state revenues that are available to pay debt service. The state's policy is to target the annual amount of debt service at 6% of revenues that are available.
In fiscal 2017, based on outstanding debt service and authorized-but-unissued bonds, the debt-to-revenue ratio is 5.68%, according to the Division of Bond Finance.
"We're flat relative to last year," division director Ben Watkins told the Cabinet on Tuesday while reviewing the
Watkins said other improving state financial metrics, such as total debt service declining by $2 billion over the last five years primarily due to refinancing activity, a well-managed state pension plan, and billions in reserves, have helped Florida preserve its triple-A ratings.
"We're in a good place right now so we need to continue to do the things we've been successful at," he said.
Watkins also warned that the rapid pace at which the state has refinanced debt may soon come to an end if upcoming monetary policy decisions impact interest rates during next week's Federal Open Market Committee meetings.
Lawmakers will use the Debt Affordability Report in their upcoming session to determine how much of the budget will include bonding for capital.
Scott's 2017 budget proposes one of his smallest debt financing plans since he took office in January 2011.
The governor's plan calls for issuing $230.7 million of bonds for transportation right-of-way acquisition and bridge construction, and $161.7 million for Florida Turnpike construction projects.
His proposal also places $1.38 billion into the primary budget stabilization fund, although an additional $1.45 billion also is available from trust fund reserves, $1.78 billion from unspent general revenues, and $615 million from tobacco reserves for unexpected emergencies.
The primary job of lawmakers during their two month meeting, which starts Jan. 12 and ends March 11, is to pass a budget.
A recent gambling compact Scott inked with the Seminole Tribe of Florida is expected to be a bone of contention.
Under the agreement Scott released publicly on Monday, the tribe will pay the state $3.1 billion over seven years in exchange for adding new Las Vegas-type games to its lineup, including craps and roulette.
The deal is believed to be the largest tribal revenue-sharing agreement in the country, according to the News Service of Florida.
Some lawmakers have questioned the pact, and pledged to make changes.
Several bills that have been filed target the Florida Municipal Power Agency and create new bond programs.
Rep. Debbie Mayfield, R-Vero Beach, has filed HB 579.
Calling it the 2015 Consumer Transparency Act, the measure targets the Florida Municipal Power Agency, and requires the joint-action agency to submit its independently prepared financial statements to the Florida Public Service Commission, an entity that usually oversees investor-owned utilities.
HB 579 also would require FMPA to submit additional financial information to the PSC; restructures the FMPA board so that only elected officials serve as board members; and appoints the PSC's public counsel to provide legal representation in proceedings before the FMPA.
The public counsel could recommend proceedings or action against the FMPA to the Public Service Commission, according to the bill.
"Our constituents have a right to see how these entities are collecting and spending their tax dollars," Mayfield said. "In a recent audit of the Florida Municipal Power Agency, Florida's Auditor General identified 15 questionable practices."
Mayfield said the most "alarming" practices were hedging by FMPA that resulted in a net loss of $247 million in recent years, employee compensation higher than the industry average, and failure to competitively bid contracts.
"Currently, the FMPA is not subject to any rate-setting authority, and although it is a governmental entity, is exempt from many laws that citizens expect and rely on for protection," she said.
Sen. Wilton Simpson, R-Trilby, has filed SB 840, a companion measure.
"FMPA must be accountable to the taxpayers they serve," he said. "The time has come for all public agencies to open their books, operate using fair market practices, and respect the Floridians they serve. This legislation will go a long way in accomplishing that goal."
Mayfield filed a bill earlier this year that would have placed the FMPA under the auspices of the Public Service Commission, a move that could have lowered the agency's credit ratings if the bill had passed. The measure did not have a companion in the Senate, and died in committee.
Bills have also been filed to renew the effort to create a new tax-exempt bond program that would allow charges on water and wastewater bills to be securitized – a program that would benefit a single issuer.
SB 324 and HB 347 would implement the "Utility Cost Containment Bond Act" to allow certain local governmental entities to finance the costs of a utility project by issuing utility cost containment bonds.
The Florida Governmental Utility Authority is the only intergovernmental authority that currently meets the criteria to provide financing under the bill, according to an analysis of the house bill.
FGUA owns and operates water and wastewater systems in various part of the state. The securitization bill would allow FGUA to issue bonds on behalf of other local government entities, and potentially earn fees for doing so.
Similar securitization bills were filed in the 2015 session, but did not pass.
