An economic slowdown, not a recession, is on the horizon for lawmakers, who will have a relatively small surplus as they piece together Florida’s next budget, a top state analyst said Thursday.
Amy Baker, who leads the Legislature’s Office of Economic and Demographic Research, cautioned that the state’s economic stability remains vulnerable to the potential impacts of natural disasters, especially major hurricanes, and outside forces such as escalating trade tensions and global economic downturns.
Baker, speaking to a joint House and Senate budget panel, outlined a report known as the Long-Range Financial Outlook, which indicates the state will get about $867 million less in revenue over two years than previously projected.
“Even though we do not anticipate a recession, the caveat is that turning points in the economy are very, very difficult to predict,” Baker told members of the Joint Legislative Budget Commission.
The projections rely on tourism continuing to exceed expectations, as the industry now accounts for a record-high 13.4 percent of overall revenues. Tourism has also covered for sagging construction numbers, particularly in suburban home building, Baker noted.
Senate Appropriations Chairman Rob Bradley, a Fleming Island Republican, said lawmakers will need to “stick to the basics” in crafting a 2020-2021 budget and not add new spending or programs.
“We’re going to have a very constrained, modest approach to budgeting this year,” Bradley said after the presentation. “Having an economic uptick doesn’t last forever.”
House Appropriations Chairman Rep. Travis Cummings, also a Fleming Island Republican, pointed to a need for “restraint” from lawmakers as they seek tax dollars for projects, groups, events and activities in their districts.
“Clearly, we can’t fund but even a small fraction of those,” Cummings said.
Lawmakers will begin holding committee meetings next week to prepare for the 2020 Legislative Session, which starts in January. They will negotiate the 2020-21 budget during the Session.
Because of an increase in powerful hurricanes affecting the state, Baker suggested establishing a new fund to collect reimbursements from the Federal Emergency Management Agency, which would then become the primary source to “help buttress” the state’s general revenue fund.
As another alternative, loans from a state reserve known as the Budget Stabilization Fund “could be a more direct source of disaster funding — spreading the repayment over no more than the statutorily required five-year period and better aligning to the FEMA reimbursement practices,” the report, which is produced each year, said.
The state has spent $1 billion through budget amendments responding to hurricanes during the past three years, but the final budget impacts from the storms remain unknown because state matches for federal funds and FEMA reimbursements remain preliminary.
As of Aug. 30, the state had received $211.9 million in reimbursements for the storms.
Meanwhile, overall revisions to the state economic forecast, crafted over the summer, project a surplus of $289.3 million, or just 0.8 percent of the general revenue estimate, for next fiscal year.
Among the major factors is a decision by the Seminole Tribe of Florida to stop paying hundreds of millions of dollars from casino operations to the state.
The Seminole Tribe decided to end payments after legislators and Gov. Ron DeSantis did not reach a new gambling agreement. The change is expected to cost the state $346.7 million in the current fiscal year. The annual payment was expected to have grown to $353 million by fiscal year 2022-23.
The tribe made its last payment to the state in March.
Bradley said while he’d like to see a new gambling deal with the Tribe, the budget for now will be put together without plans to have the money.
“I think it’s in their best interest, I think it’s in the state’s best interest to have a deal,” Bradley said. “But we’re not going to make a deal, the governor isn’t going to make a deal, the House is not going to make a deal that isn’t in the best interest of the taxpayers.”
The outlook was developed, in part, by analyzing programs that have historically driven significant increases in the state’s budget, including Medicaid, public-school funding and constitutional requirements.
Last month, DeSantis declared Florida better positioned for a recession than it was a decade ago.
“I think we are much better positioned to weather an economic downturn then we were in 2008, 2009, when we really took it on the chin there,” DeSantis said during an Aug. 16 appearance before the Florida League of Cities in Orlando. “I think we’ve been able to expand the base and build better economic resiliency here.”