September 2015 Budget Watch

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Projected Budget Surplus Of $635 Million Is Not As Large As It Seems

It is estimated that the 2016 Florida Legislature will have a budget surplus for FY2016-17, meaning major budget cuts should not be needed and there should be some money left over for new initiatives. After funding a continuation budget, including expected cost increases in current programs and other historically funded items, it is anticipated that there will be $635.4 million (including an allowance for $1 billion in cash reserves) in General Revenue (GR) left over. While this is surely better than the string of multi-billion dollar deficits from FY2008-09 to FY2011-12, the Legislature can only spend a portion of that surplus without creating a deficit in two years.

Highlights:

  • Legislators will have an estimated GR budget surplus of $635.4 million when they develop the state budget for FY2016-17. This is the amount remaining after funding what could be considered a continuation budget. There is a surplus in each of the three years covered by the Long Range Financial Outlook.
  • However, if more than $74.0 million of the FY2016-17 surplus is spent on recurring appropriations, an estimated deficit would occur in the third year (FY2018-19).
  • For the first time, the Outlook assumes there will be tax cuts ($262.6 million) and trust fund sweeps ($237.3 million) in each of the three years. These two items largely offset each other in the first year, but the compound effect of the tax cuts results in a $494.3 million reduction in year three.
  • “Critical needs” will require an additional $664.8 million over the recurring GR base budget in FY2016-17 and “high priority needs” will require and additional $934.2 million. In total, an additional $1.6 billion is needed to fund a continuation budget.
  • Medicaid is the largest budget driver, making up 37.1 percent of all critical and high priority needs.
  • It is assumed the Required Local Effort school property tax millage rate will stay the same. This would produce $428 million from rising property values. This tax increase on local taxpayers would provide 81 percent of the amount need to fund the almost 26,000 new public school students.
  • The Outlook further assumes a 2.4 percent increase in per student funding.
  • The Outlook assumes a GR reserve of only $1 billion. The Legislature has left a larger reserve than that in each of the last five years, ranging from $1.2 billion to $1.6 billion. Any reserve larger than $1 billion would reduce the surplus.

The Author

Kurt Wenner, Vice President of Research. Kurt has authored all of the major tax publications produced by Florida TaxWatch, including pieces on Florida’s Intangibles Tax, and general sales, property, and business tax issues.

See Kurt's full bio

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Media Inquiries:  Contact Leah Courtney by Email or Phone: 850.212.5052

Media Inquiries:
Contact Leah Courtney by Email
or Phone: 850.212.5052