Budget Watch - Small Surplus Estimated for the Next State Budget
It appears the 2020 Florida Legislature will have a little money left over after funding a continuation budget for the next fiscal year, but lawmakers need to be careful about spending it. State economists estimate that there will be a General Revenue (GR) budget surplus of $289.3 after funding the base budget plus “critical needs” and “high priority needs”—a conservative continuation budget.
But a “structural imbalance” in Florida’s budgeting process still exists—current recurring revenues will not keep pace with recurring expenditures. Even if the next session produces only the budget assumed in the new Long-Range Financial Outlook, budget shortfalls are forecast in each of the following two years, totaling $486.0 million and $365.7 million, respectively. Any new initiatives or funding of existing programs above current levels will cause those shortfalls to grow.
This also assumes the Legislature will transfer $213.4 million from trust funds1—money earmarked by law for specific uses—into the General Revenue (GR) Fund. These sweeps account for most of the projected surplus. The Outlook also assumes the Legislature will pass tax cuts with a first-year impact of $98.3 million.2 The forecast also assumes lawmakers will leave cash reserves (unobligated GR) of $1 billion. This should probably be considered the bare minimum reserve, since the past nine budgets have left (sometimes only slightly) larger ones. Any reserve more than $1 billion will also reduce the surplus.
The new Long-Range Financial Outlook, recently adopted by the Joint Legislative Budget Commission, is a required annual report comparing estimated revenues and expenditures to give the Legislature a sense of the state’s budget position going into session and whether lawmakers can expect a budget shortfall or surplus (for more description of the Outlook, see Appendix). It is a valuable tool that also looks ahead, giving a sense of what past budgetary actions mean for the state’s financial outlook over the next three years.
This is the fourth year in a row that the Outlook forecasts a small surplus for the upcoming budget year followed by two years of shortfalls. The Legislature has avoided these shortfalls—as it is required to do—but the fixes have been generally short-term in nature. This includes the use of trust fund sweeps to provide sufficient GR. So, the specter of future shortfalls persists.