Florida's state government is facing financial challenges: divergent budget versions, the federal government not following its promises to reimburse Florida for $573 million and a possible need to dramatically increase local aid if property tax cuts are enacted.
The state legislature completed the first half of the budget process Feb. 12 and 13 when both chambers approved their initial versions of the budget. Now legislative leaders and Gov. Ron DeSantis are negotiating to create a reconciled version.
As things stand, the Senate all-funds budget is 1.2% above the House budget and the governor's budget is 3.8% above the House budget.
Republicans control the governor's office and hold supermajority control of both houses of the state legislature. That doesn't mean they march in lockstep.
Last year,
Senate President Ben Albritton and Speaker of the House Daniel Perez are not getting along, said Jeff Kottkamp, president and CEO of Florida TaxWatch. This may require an extension of the legislative session beyond its scheduled end on March 13, he said.
CBS News Miami posted an interview with Albritton this weekend where he described Perez as a close friend but said he had policy disagreements with him.
The legislative budgets are closer to each other than they were last year, which may make reconciliation easier.
"I think the legislators will settle on a budget that's close to what they are proposing," said John Mousseau, executive vice president and chief investment officer at Cumberland Advisors. "The governor's term is up at year end, so the lame duck status doesn't give the legislators a lot of incentive to deal."
Joseph Krist, publisher of Muni Credit News, said, "It is so political this year because the governor is term-limited out but his presidential aspirations remain. That I believe will color everything since his succession has been such a soap opera between his wife's potential candidacy and Trump acolyte Byron Donalds running. The primary isn't until August, so this won't be settled and that will make the politics harder."
The House in connection with passing the budget
The Senate hasn't taken up the topic, Kottkamp said. The House leadership may insist the Senate pass a joint resolution on the topic before it agrees to pass a budget, he said.
Assuming the legislative bodies both pass resolutions on property tax reform, there would have to be a November referendum to change the state constitution before the reform could go into place.
Katherine Betta, spokeswoman for Albritton, said any change to property taxes would not affect the state government's finances in the coming fiscal year, which starts July 1.
"Many of Florida's smaller, fiscally constrained counties would become entirely dependent on the state to fund their local operations," if property taxes were slashed, Florida House Democratic Leader Fentrice Driskell
Kottkamp said the so-called "fiscally constrained" 32 of Florida's 67 counties would be most hit by any elimination of property taxes and would be most likely to turn to the state for aid.
"It looks like property tax elimination for non-school taxes will be on the ballot. If it passes, the state will be under enormous pressure to assume some costs," Krist said.
"Property taxes pay for local schools and many localities will not want decisions regarding school funding forced on them," Mousseau said. "Furthermore, if you are replacing the property taxes with other various sales tax increases, the net result is you have a more regressive tax system with lower income Floridians being hurt more. I can't see this getting much traction."
Krist and Kottkamp said they expected the ultimate budget to be somewhere around $115 billion to $116 billion.
Adding to the state's financial stew, the federal government has failed to reimburse Florida's state government for $573 million in immigration enforcement expenses since 2023, most of it spent this fiscal year.
Albritton told WCBS Miami this weekend he expects the federal government will eventually reimburse the state for the work. Some news sites have quoted anonymous federal sources saying the federal government may not reimburse the state.
If Florida's government doesn't "get the money by year end, I don't see funding happening in a Democratic Congress," Krist said. "It would be a lesson for Florida and other states."
Mousseau said, "The fact that a solidly Republican state like Florida is not getting reimbursed should be a shot across the bow to a lot of state governments regardless of political orientation. That's a meaningful hole in the budget. And for states not in the same financial shape as Florida, it's a real cause of concern."
Florida has triple-A ratings from S&P Global Ratings, Fitch Ratings and Moody's Ratings.
Amy Baker, coordinator for the Office of Economic and Demographic Research,
Baker told state lawmakers the state faced combined deficits of $8.1 billion in fiscal 2027-28 and fiscal 2028-29.
Of the office's identified 15 critical needs addressed by Florida's budget, four of these needs explain 86% of the new spending projected for all 15 needs over the fiscal years 2026-27, 2027-28 and 2028-29, she said. They are a general revenue transfer to the Emergency Preparedness and Response Fund ($2.35 billion), the Medicaid program ($1.83 billion), the Florida education finance program ($1.42 billion) and increases in employer-paid benefits for state employees ($1.18 billion).
The EPRF is the state's primary fund for responding to natural emergencies.
The projections for increased Medicaid costs come from caseloads and expenditure estimates from the state's Social Services Estimating Conference, Baker said. About 72% of Medicaid is used to pay for managed care, Baker said, primarily for elderly people in nursing homes.
Baker said the proportion of Florida's population age 65 or over continues to increase. Whereas 17.2% of the state's population was over 65 in 2010, 24.7% will be in 2030.
