The TaxWatch Research Blog

The TaxWatch Research Blog is a forum where our research staff can address topics and issues in a short format. Keep an eye on this space during Legislative Session for frequent posts making sense of the activity at the Capitol. 

Fiscal Year 2021: Florida Reduces Debt Ratio

Fiscally, Florida is in good condition. This is also true of the state’s debt position. FY 2020-21 marks the eighth consecutive year with a debt ratio below the 6 percent target. In addition:

  • Outstanding debt, debt service and the debt ratio have decreased;
  • GR collections increased by $4.9 billion over FY 2019-20;
  • Increased funds within the BSF, significant cash reserves, and an increased debt capacity, provide Florida cushion in case unexpected funding is needed;
  • All three major rating agencies affirmed the State’s AAA general obligation ratings; and
  • Credit agencies determined Florida’s outlook is stable.

Every year, as required by Section 215.98, Florida Statutes, the Division of Bond Finance creates a debt report, an analysis that helps policymakers consider Florida’s fiscal position. The report informs the government’s decision-making but it can also tell the taxpayer how much of their hard earned money is being committed in the future for expenditure being made today.  In this blog, Florida TaxWatch provides taxpayers with a summary and key takeaways drawn from the Division of Bond Finance’s “Debt Report State of Florida 2021.”[1]

Florida prioritizes managing its debt to ensure sustainable use of funds as the state continues to develop. To limit the accumulation of debt, Florida has a targeted debt ratio of 6 percent and a limit of 7 percent.[2] The government strives to uphold these guidelines by restraining the use of borrowed funds and encouraging a revenue-producing economy. The COVID-19 pandemic challenged Florida’s finances in FY 2020; however, the receipt of billions of dollars in federal aid and an economy that rebounded much quicker than expected improved Florida’s fiscal condition considerably This is reflected  in the Florida’s FY2020-21 debt ratio of 4.30 percent, a decrease from the 5.49 percent ratio of the preceding year.

Debt Issuance

Florida’s legislative and gubernatorial aversion to bonding, Florida’s consistently high bond ratings, and  taking advantage of bond refinancing opportunities has helped reduce the state’s outstanding debt. As of June 30, 2021, the total outstanding direct debt of Florida was $18.4 billion, with direct debt decreasing by $825 million from the prior fiscal year. This continues a downward trend that began in FY 2011, totaling a $9.8 billion reduction, or 35 percent, of the total outstanding debt.[3]

The debt primarily consists of funding efforts for transportation and education, composing 47 percent and 43 percent of the debt, respectively. Due to less borrowing for transportation projects than expected, the projected debt issuance for the next ten years decreased by 31 percent, equating to around $844 million, since the 2020 Debt Report.

Limiting debt issuance not only keeps futures costs down, but also creates an allowance for future debt. By expanding the divide between the current debt ratio (4.30 percent) and the targeted debt ratio (6 percent), Florida produces a debt capacity. The debt capacity allows for Florida to withstand a sudden onset of debt—which may be necessary to resolve unpredicted circumstances—while respecting its goal of a 6 percent debt ratio. Due to the current low debt ratio, the total debt capacity that is expected to amount over the next ten years is approximately $38.3 billion.[4]

Debt Service Payments

Debt service payments are the principal and interest payments made to retire the debt. For FY 2022, Florida’s debt service payment was $2.2 billion. A milestone payment for transportation public-private-partnerships (PPP) projects caused service payments to increase by $200 million compared to the previous year. With the milestone payment completed, the debt service payment is expected to decrease by $424 million in FY 2023. This downward trend is expected to continue through the decade due to years of debt issuance restraint. In 2031, Florida’s debt service payment is expected to be $990 million, marking the first time Florida paid less than $1 billion since the origin of debt service payment tracking in the 1990s.

Over the next ten years, the state of Florida is expected to pay $13.2 billion in debt service on outstanding net tax-supported debt, and 32 percent of the money, equivalent to $4.3 billion, is interest payments.

Refinancing can save taxpayers money by reducing interest rates on bonds. Florida has successfully refinanced multiple times. Since FY 2013, the government refinanced its debts 113 times, creating gross debt service savings of more than $2.6 billion over the remaining life of bonds.[5] In FY 2021, Florida completed 16 refinancing transactions, resulting in gross debt service savings of $335 million.[6] Proactive pursuit of lower interest rates has helped the state’s long-term costs, but since an estimated 80 percent of the state debt has already been refinanced,  fewer candidates for refinancing are expected within the next five years.

General Revenue

Florida’s general revenue (GR) relies primarily upon sales tax, so during COVID-19, the state experienced a general revenue drop of $2.0 billion (6.1 percent) in FY 2019-20.[7] FY 2021 reaped significant benefits from the economic rebound, with Florida’s general revenues continually exceeding forecasted levels. General revenue collected in FY 2021 was approximately $4.9 billion more than the general revenue collected in FY 2020, marking a 15.7 percent increase. Current estimates project continued GR growth in FY2021-22, of $620 million.  The next forecast, which will be made later this month, will surely further increase the estimate for FY2021-22

In FY 2021, federal funds given during the pandemic helped the state to avoid a budget deficit and using emergency resources relied upon during times of economic weakness, such as the Trust Fund Reserves or Budget Stabilization Fund (BSF). On the contrary, these resources experienced influxes. The excess within trust fund balances at the end of FY 2021 increases the balance of total reserves by about $12.6 billion. Further, Florida placed $1 billion into the BSF to enhance the state’s financial security.

Let’s Not Forget About Local Government Debt

While outstanding debt at the state government level in Florida remains relatively low, it is higher at the local level. Florida’s local governments are carrying approximately four times the debt of the state.  While Florida’s total state debt per capita ranks 47th out of the 50 states, Florida per capita local debt ranks 19th.[8] As Florida taxpayers vote, they should be aware of their comparatively high local tax level, as Florida TaxWatch discusses in the report, A Decade of Self-Taxing. The state of Florida manages its debt in a way that benefits taxpayers, and the state should consider how to ensure the effective practices continue.

[1] Division of Bond Finance, “Debt Report State of Florida 2021,” December 2021. See,

[2] See §215.98, Florida Statutes. Florida’s debt ratio is the state’s annual debt service payments divided by the amount of revenue eligible for use upon debt service payments.

[3] FY 2015 experienced an increase of debt issuance due to investment in transportation infrastructure and an adjustment in how the Florida Department of Transportation must report public-private-partnership projects.

[4] Debt capacity in this calculation is based upon the 6 percent debt ratio goal. In an extreme circumstance, budget decisions may need to be made using calculations relying upon the 7 percent debt ratio limit.

[5] Calculated in consideration of present money value.

[6] Calculated in consideration of present money value.

[7] Office of Economic and Demographic Research, Results of General Revenue Estimating Conferences

[8] Calculations by Florida TaxWatch, using data from the U.S. Census Bureau, 2019 State and Local Government Finances.

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