Group warns that Florida may not get what it needs from CARES Act

Florida cannot use federal bailout money from the CARES Act to shore up the most serious budgetary problems being caused by the coronavirus crisis, the anticipated collapse of tax revenue, the Florida Policy Institute warned Tuesday.

The group cited new guidelines published by the U.S. Treasury that advised that the $4.6 billion in federal coronavirus relief fund money Florida is expecting cannot be used to cover tax revenue shortfalls.

Nor can the CRF money be used to expand Florida’s Medicaid program, the group contended. Florida’s Medicaid program is expected to see dramatic new demands as newly unemployed Floridians lose their health care insurance and apply for Medicaid coverage.

“These restrictions on the CRF put states in a bind,” said Sadaf Knight, chief executive officer of Florida Policy Institute. “Without additional federal relief, states are going to face a fiscal cliff.”

Few states have a farther drop off that cliff than Florida, she cautioned. The state has a double problem of receiving an unusually large portion of its tax revenue, nearly 80% of its general fund, through sales and use taxes. And Florida has an economy based significantly on tourism and hospitality, which are being mothballed during the crisis, causing those tax revenues to plummet.

If Florida cannot use the federal relief money to shore up most of what the institute said could be a $4 billion revenue shortfall and another $1 billion in Medicaid expansion, then Florida would be forced to enact draconian budget cuts, she warned.

Florida Senate President Bill Galvano has advised Senators in memos that he thinks additional clarifications on this point are needed from the federal government.

Galvano suggested lawmakers may be called back to Tallahassee for a Special Session to deal with federal programs, but he has not yet made such a call.

Knight also contended that Florida’s rainy day fund will not be sufficient to make up the difference.

Knight and her group, a nonprofit, nonpartisan think tank in Orlando that has a liberal economic outlook, urged Florida’s congressional delegation to push for more federal relief for states and local governments and to push for federal money that can be used to shore up the kinds of issues Florida faces.

“The budget that was just passed by our Legislature included some very important and long-awaited investments. For instance, teacher pay raises, affordable housing, and conservation, just to name a few,” Knight said. “Unless there is more state fiscal relief that is both flexible and targeted to addressing revenue shortfalls, all of these investments will be on the line, and states will be facing devastating cuts to programs across the board.”

Gov. Ron DeSantis has delayed signing the $93.2 billion state budget the Legislature approved for the 2020-21 fiscal year starting July 1. DeSantis has warned he’ll probably have to enact major cuts.

“For the revenue shortfall the solution really is additional fiscal aid from the federal government,” Knight said. “Our reserves are simply not enough to fill the gap. And without additional reserves, we are just going to face devastating cuts.

“For the long term, in order to create a stronger economic foundation for the state, we could also increase revenue by closing corporate tax loopholes. But in the immediate term, the additional aid from the federal government is what is going to be needed to close that gap,” she said.