Budget Watch – How Will the 2023 Legislature Handle a Record $13.5 Billion Budget Surplus?

As Florida TaxWatch has been detailing in our Budget Watch series, the state’s fiscal circumstances have been steadily improving since the initial shock (and resultant revenue loss) at the beginning of the pandemic. Even with historic state spending and tax cuts over the last two budgets, record reserves still exist. Florida’s tax system continues to produce revenue at a breakneck pace, with actual collections beating the estimate in each month over the last two year. Lately, the magnitude of the overage has been staggering. In the last three months of FY2021-22 (April-June), collections exceeded estimates by $2.545 billion (23.9 percent).

Now, the new Long-Range Financial Outlook, recently adopted by the Joint Legislative Budget Commission, adds estimated expenditures to the equation. The result is by far the largest projected General Revenue (GR) budget surplus ever forecast by the Outlook--$13.5 billion for the next budget (FY2023-24). The surplus grows to $14.6 billion FY2024-25 and $15.5 billion in FY2025-26.

This estimated surplus assumes the 2023 Legislature will fund the entire current recurring base budget and add funding to pay for increased workloads, such as the number of PreK-12 students
and Medicaid recipients (as determined by the state’s estimating conferences). It also includes some average increases in spending and the restoration of non-recurring funding that the Legislature has historically funded. The Outlook includes more tax cuts and assumes that the Legislature will leave $1.7 billion in unspent cash reserves (plus $3.1 billion in the Budget Stabilization Fund and $499 million in the new Emergency Preparedness and Response Fund). The estimated surplus assumes no new initiatives or extraordinary increases in funding, but it also does not include any reduction/elimination of appropriations in the base budget. The surpluses forecast for the next two budget years assume the Legislature follows this budget blueprint.

The Outlook is a constitutionally required annual report that compares estimated revenues to 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.