Florida Senate leaders said this week they are open to the possibility of borrowing money to pay for infrastructure needs, including education projects.
Thonotasassa Sen. Tom Lee raised the issue Wednesday at a Senate Appropriations Committee meeting after senators reviewed a revised long-range financial report that showed hurricane recovery costs and slowing economic growth could impact the next state budget.
“I think given where we are in the 11th year of an economic expansion, the downside risks in this economy are much greater than the upside potential,” Lee said.
Lee suggested senators look at the state’s capacity to borrow money, within bonding limits set by law and the state Constitution, if the economy softens in the coming years.
“We don’t have a lot of tools in our toolkit to stimulate the economy here in this state. Bonding capacity is one of those,” Lee said.
Senate Appropriations Chairman Rob Bradley also said bonding would be part of the discussion as lawmakers craft a 2019-20 state budget when they meet during the annual session in the spring.
“We have a lot of capacity. We have reduced debt over the last several years under Gov. (Rick) Scott’s leadership,” Bradley said.
In his eight years as governor, Scott largely opposed major bond issues. That stance, as well as an aggressive plan to refinance older debt using historically low interest rates, had allowed the state to reduce its direct debt since Scott took office by some $7 billion through the end of last fiscal year, according to an August report.
“That all being said, when you look at the long-term obligation for capital improvements that must occur, I think that is something that should be on the table for discussion,” Bradley said about bonding. “We certainly don’t want to go crazy on it, but it certainly it should not be off limits like it has perhaps been in the past.”
Florida’s capacity to bond was highlighted this week by a new report from state analysts that showed the state could borrow up to nearly $2.6 billion in the coming year through the Public Education Capital Outlay program.
Known as PECO, the program helps pay for construction and maintenance projects for public schools, state colleges, state universities and other education facilities. Bonds are financed by the state’s tax collections on electric and communications services.
Lawmakers are not likely to consider borrowing near the PECO limit, but they have approved bond issues in excess of $1 billion in the past. In the 2006-2007 fiscal year, lawmakers and then-Gov. Jeb Bush backed $1.4 billion in PECO bonds.
However, during Scott’s two terms, he and lawmakers only agreed once to issue PECO bonds, borrowing $275 million in 2016-2017.
Before Scott took office, the state had annually issued PECO bonds going back at least the 19 prior years, according to state records.
Lee, a former Senate president and budget chairman, said any borrowing would be “comfortably under” financial caps to preserve the state’s top-level financial rating. He also said the need to borrow money may be mitigated if the economy remains strong.
But he said there are “tremendous infrastructure deficits in this state.”
He noted a November vote by Hillsborough County voters to back a half-cent sales tax to pay for school maintenance, including air-conditioning systems. The school system had advocated for the tax plan, citing a lack of state funding to address the issue.
Another infrastructure challenge will be the need to improve school security across the state, Lee said, in the wake of February’s mass shooting at Marjory Stoneman Douglas High School in Broward County.
“These schools were built for a different era,” Lee said. “We live in a different world, and there are vulnerabilities everywhere, and we need to try to tighten those up and that’s going to cost some big money.”