Florida lawmakers get first peek at 2020 budget challenges
The impact of Hurricane Michael on Florida’s 2020 budget, and other unanticipated expenses, will wipe out any discretionary funding legislators have to build the budget next year, according to the state’s top economist.
In the best-case scenario the projected discretionary balance of $223.4 million is gone, and in the worst case scenario there will be a shortfall approaching $250 million, Amy Baker, coordinator of the Office of Economic and Demographic Research, told the Senate Appropriations Committee Wednesday.
“As a starting point, I would assume that the safest, most conservative assumption is [that] anything new you want to do is going to have to come at a reduction from somewhere else in the budget,” she advised the committee during its first look at factors affecting the state’s next spending plan.
Baker said a number of factors are causing increases in state budget priorities, and there are still unknown costs related to 2017's Hurricane Irma and Hurricane Michael, which made landfall in the Florida Panhandle on Oct. 10.
Florida is still waiting to receive nearly $250 million from the Federal Emergency Management Agency for reimbursements related to Irma. On top of that, the Legislature spent an additional $269 million on that recovery effort plus $16.9 million in direct tax relief.
Baker said she anticipates expenses for Hurricane Michael will be even greater than Irma, even though Michael impacted fewer counties.
That’s because people living in most of the 16 affected counties have higher poverty levels and lower average wages than the rest of the state, and most of the region was already economically distressed before the hurricane struck.
In the Panhandle, fewer people owning homes will be compensated for their losses because most homes were not mortgaged and there was no requirement for them to have insurance.
The state probably won’t see much revenue from an increase in sales taxes due to rebuilding, she said.
Generally, Florida’s economy had largely recovered from the recession by the end of 2017 in all categories except construction. That lag is being compensated by outsized growth in the tourism industry, Baker said, but tourism can be susceptible to disease outbreaks and natural or manmade disasters.
Tourism can also be affected by a strong dollar, causing a chilling effect on international travel, Baker said. That issue will be studied further.
Some recent economic conferences have detected deficits in several state programs and unanticipated higher costs in others that will cause potential budget problems in fiscal 2020.
Those include an $84.5 million cost increase in the Bright Futures state scholarship program due to higher enrollment; a $75 million loss in the Public Education Capital Outlay Trust Fund due to a change in assumptions; and a $43.2 million loss in the Risk Management Insurance Trust Fund due to Hurricane Irma.
Other problems include a $30 to $35 million cost increase for the state pension fund contribution because of a change in methodology; a $13.4 million increase for state prisons because the inmate population remains flat as opposed to declining; and a $7 million loss in the State School Trust Fund from lower than anticipated dedicated funding.
The state in 2020 will also feel the effects of slowing national economic growth, Baker said, adding, “It’s not negative growth, it’s just slowing of the positive growth that we were expecting to see.”
Events triggering the slowdown include waning stimulus from federal tax cuts and higher spending, the accumulating impacts from enacted tariffs, and a more restrictive Federal Reserve policy.
Appropriations Committee Chairman Sen. Rob Bradley, R-Orange Park, said because the state is reliant on sales taxes and is sensitive to changes in the state and national economies lawmakers need to continue to be conservative when the budget is prepared.
“We have some very serious challenges,” he said.