Florida Gov. Rick Scott signed his last budget into law Friday, in which the state will spend a record $88.7 billion for fiscal 2019.
Scott, a Republican, used his line-item veto power to strike $64 million from the spending plan – the lowest amount of his nearly eight years in office.
“As governor, I promised to fight every day to turn our state around and today, as I sign my final budget, it’s clear our hard work has paid off,” Scott said in his budget transmittal letter. “Working with the Florida Legislature, we’ve made record investments across state government and this year, I focused on investments that secure Florida’s future so that the incredible progress we have made will continue to ensure the prosperity of Florida families for generations to come.”
Term limits mean Scott could not run for a third consecutive term this fall. He is expected to seek the Republican nomination for the U.S. Senate.
In addition nearly $550 million in tax cuts, Scott said the budget that takes effect July 1 provides a record amount for education and makes critical investments in opioid addiction programs.
Scott axed $15.1 million of projects to be funded with general revenues, including reversing $15 million the Legislature had cut for Zika research. He cut $15 million in capital outlay slated for charter schools.
Most of the cuts, $48.9 million, were for small projects lawmakers funded by sweeping various trusts funds. The largest-single amount Scott vetoed was $10 million taken from the Department of Legal Affairs Revolving Trust Fund.
Working capital reserves total $1 billion, while the budget stabilization fund is $1.48 billion. If additional emergency funds are needed, $770.3 million can come from the Lawton Chiles Endowment Fund, a trust fund that is supposed to be dedicated to low income housing.
The budget provides $10.1 billion for the Department of Transportation, according to Scott. The total amount for bonds was not immediately available. Scott sought $739 million of bonds for transportation projects in his budget.
Scott approved the budget just six days after it was passed by the GOP-led Legislature.
In his transmittal letter, Scott also touted passage of Amendment 5, saying the constitutional amendment would “keep taxes low” by making it harder for politicians to raise taxes if 60% of voters approve it in November. The Legislature approved the measure mostly along party lines, placing it directly on the ballot.
The amendment will require a vote of two-thirds majority of both the House and Senate to raise a tax or fee, including highway user fees and university tuition and fees.
The same requirement would apply to decreasing or eliminating any state tax, fee exemption or credit.
Currently, changes to state level taxes and fees require a simple majority vote. That includes the sales tax, which is the main funding source of the state budget because Florida does not have a state personal income tax or state property tax.
The amendment could reduce the state's flexibility to address future economic volatility, Fitch Ratings analyst Karen Krop said in a comment Friday.
“This amendment would not have an immediate impact on state credit quality, although over time, the more stringent requirement for raising revenues could lead to erosion in the state's financial resilience,” Krop said.
Fitch rates Florida’s general obligation bonds AAA, and assesses the state's revenue framework at the AA level, reflecting in part the economic sensitivity of the sales tax. The rating also incorporates the virtually unlimited legal ability the state maintains to raise revenues.
“The addition of a super-majority requirement to raise taxes would not in and of itself imply a weakened legal ability to raise taxes since the power to do so would remain within the legislature,” Krop said. “However, the higher bar for raising taxes would make it more difficult to utilize one of the key tools that states have to manage financial operations during periods of economic and revenue weakness, potentially lowering the state's resiliency through the economic cycle.”
Fitch said other states have seen financial operations narrow and credit quality decline at least in part because supermajority voting requirements limited the practical use of revenue-raising as a budget balancing tool.
In Oklahoma, which has a 75% voting requirement, the state has struggled to close recent structural budget gaps and has relied on deep spending cuts, one-time actions and reserve draws, Fitch said.
“While it is Fitch's expectation that Florida will continue to exhibit the strong financial management that is one of the underpinnings of its AAA issuer default rating, we will assess the extent to which obstacles to revenue raising affect longer term fiscal balance for the state and the various entities that rely on legislative control over revenues to support credit quality,” Krop said.