September 2016 Budget Watch

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Projected Future Budget Shortfalls Require Immediate Attention

The 2017 Legislature will be facing a very tight budget year. After a string of three straight years with projected budget surpluses ranging from $336 million to $846 million, it is now estimated that during the next legislative session there will be just enough money to fund a continuation budget for FY2017-18. What’s more, significant budget shortfalls loom in subsequent years.

Highlights
  • State economists estimate the 2017 Legislature will have an estimated General Revenue (GR) budget surplus of only $7.5 million when they develop the next state budget (FY2017-18). This is the amount remaining after funding what could be considered a continuation budget. However, without budget or revenue changes, a budget shortfall is forecast in each of the following two years, totaling $1.3 billion and $1.9 billion, respectively.
  • As it did for the first time last year, the Outlook assumes there will be tax cuts ($261.6 million) and trust fund sweeps ($242.5 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 $769.6 million reduction in year 3.
  • “Critical needs” will require an additional $484.9 million over the recurring GR base budget in FY2017-18 and “high priority needs” will require an additional $1,145.1 million. In total, these needs require an additional $1.630 billion to fund a continuation budget.
  • Medicaid accounts for the majority of this protected spending, with increased costs making up 55.1 percent of all critical and high priority needs.
  • It is assumed that the Required Local Effort (RLE) school property tax millage rate will stay at the current 4.638 mills, which reflects the 2016 Legislature’s school property tax relief efforts. Maintaining that rate would still produce an additional $494.4 million from rising property values. If not all of the tax relief is recurring, RLE revenue could be less than estimated, requiring additional GR.
  • The Outlook further assumes a 2.73 percent increase in per student funding, which would rise from $4,028 this year to $4,138.
  • The Outlook assumes a GR reserve (unobligated cash) of only $1 billion. The Legislature has left a larger reserve than that in each of the last six years, ranging from $1.1 billion to $1.6 billion. Any reserve larger than $1 billion would reduce the surplus.
  • It will take some combination of budget reductions or revenue increases totaling $483 million in each of the next three years to erase the projected shortfall.

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