The process of dismantling a vehicle for state health education and research funding is underway.
Under a bill (HB 5011) Gov. Ron DeSantis signed last month, Florida is terminating and liquidating the Lawton Chiles Endowment Fund. Over the next 12 months, the state will fold those funds into the Budget Stabilization Fund, a reserve pot to buffer unexpected drops in revenue.
The fund, named after former Florida Democratic Gov. Lawton Chiles, was established by the Legislature in 1999 at the urging of Republican Gov. Jeb Bush to pay for health programs and education in the state.
On July 1, the bill closed off the endowment fund, which will be emptied and terminated by June 30, 2022, the end of the current fiscal year.
Last week, the State Board of Administration transferred $1 billion from the endowment fund to the Budget Stabilization Fund.
By the end of the current fiscal year, the State Board of Administration will also transfer $8.2 million to the Tobacco Settlement Trust Fund and about $800,000 to the Biomedical Research Trust Fund. The law doesn’t dismantle those two programs.
The endowment fund also has $8 million in other assets, the proceeds of which will be transferred quarterly to the Department of Financial Services beginning Sept. 30.
Previous estimates valued the Lawton Chiles Endowment Fund at $958 million. However, estimates state economists issued Friday showed the fund topping $1 billion.
The final transfer to the Budget Stabilization fund will approach $1.1 billion, considering ongoing adjustments.
During this year’s Legislative Session, proponents of the liquidation suggested the move will protect the funds from future sweeps. They also argued the move would provide greater flexibility for the funds.
Ahead of this year’s Session, former Sen. Rob Bradley and former Rep. Travis Cummings, then the Legislature’s top two budget officers, suggested disassembling the Lawton Chiles Endowment Fund to brunt the economic impact of the COVID-19 pandemic.
Despite the pandemic dealing less of a fiscal blow than anticipated, lawmakers from this year’s leadership team moved forward with funneling the fund into state reserves. The Senate initially held out on that offer before conceding, even as lawmakers revived other expenditures, including canceling Medicaid cuts.
“It all goes back to making sure we have ample reserves,” said Rep. Jay Trumbull, who now serves as the House’s top budget officer.
The Legislature created the endowment with $1.7 billion gained through the state’s settlement agreement with tobacco companies.
Over the years, however, the fund proved vulnerable to sweeps, according to a staff analysis.
In 2008 amid the financial crisis, for example, $700 million was transferred from the endowment fund to the general revenue fund to offset the projected shortfall from the Great Recession.
Then, in 2013, lawmakers transferred another $350 million from the fund to the general revenue fund.
While Republicans widely supported the measure, Democrats voiced various concerns. Those included dismantling the health program during a pandemic and the disrespect of disassembling a program named after the last Democrat elected Governor — who also died in office.