Taxes

Governor's Tax Relief package - Florida has a budget surplus of approximately $18 billion and there is certainly sentiment in the Legislature to give some of it back to the taxpayers.  It is too early to tell exactly what lawmakers have in mind, but the Governor's tax plan, released as part of his budget recommendations will likely get a lot of consideration.  The Governor's plan focuses on one-time sales tax relief for families.  It totals $1.4 billion, $1.1 billion of which is non-recurring, including four sales tax holidays and one-year exemptions for items including children's books, toys, and athletic equipment, cosmetic articles, pet food, oral hygiene products, and various household items costing less than $25.  There are also permanent exemptions for baby and toddler necessities, cribs and stroller, pet medications, and gas stoves.  The Governor also proposes to increase the sales tax collection allowance provided to retailers by $141.4 million.  For a compete listing with the value of each provision see this document.

Tax Legislation Advancing in Committee 

While it is a good bet that many of the Governor's proposed tax cuts will make it into the final legislative tax package, lawmakers will want to include there own priorities and could very well exceed the Governor's total.  Some bill that have already been heard in committee include:

Communications Services Tax (SB 1432/HB 1153) - Reducing this tax is a long-time recommendation of Florida TaxWatch.  Florida CST is one the highest in the nation, and the combined state and local tax rate can exceed 15 percent, more than twice as high as the sales tax.  Since it applies to cell phones, cable and satellite television video and music streaming, landline phone service (partial exemption), and other services, some taxpayers pay it multiple times.  These bills would cut the state tax rate by 1.44 percent. Reducing the regressive CST would benefit virtually all Floridians.  This week, Florida TaxWatch President & CEO Dominic Calabro was on hand at the Senate Regulated Industries Committee to highlight our research on the need to reduce the CST.  The bill cleared its first committee stop unanimously.

Sales Tax Exemptions - There are bills that would exemption diapers (SB 114), investigative services by small agencies (SB 116),  renewable natural gas machinery and equipment (SB 844), and building materials used to construct an affordable housing unit (SB 102). 

Interchange Fees - Both SB 564 and HB 677  were approved in committee this week. They would prohibit credit card payment networks from charging interchange fees, known as "swipe fees", on the sales tax portion of a transaction, as Florida TaxWatch recommended in a recently published commentary. This could be done by either deducting It from each transaction at the time of sales, or through a rebate of interchange fees charged on the sales tax component of the transaction.  Swipe fees in general add cost for retailers which are passed on to consumers.  Charging the fees of the sales tax collected by retailers punishes them for performing a service for the state.  Both bills cleared their first committee stop in Week 2.

Property Taxes - Two proposed constitutional amendments have advanced.  One would reduce the maximum assessment growth under Save Our Home from three percent to two percent.  Another proposes to increase the property tax exemption counties and cities are currently authorized to offer low-income, long-term elderly residents from $250,000 to $300,000.  The Save Our Homes amendment (SJR 122/HJR 469) and the exemption for seniors (SJR 126/HJR 159) have both advanced in both chambers.  A general bill (HB 101) also passed that would add federal law enforcement officers to those that qualify for current property tax exemptions for serving spouses of first responders and first responders that were permanently disabled in the line of duty.

The Save Our Homes amendment generated some debate about how much it would reduce property tax revenues for local governments and schools. It is estimated that if the lower cap would have been in place in 2022, revenue would have decreased by $150 million.  However, Florida TaxWatch research has shown that overall, Save Our Homes does not decrease total revenue as much as it shifts the tax burden to non-homestead properties.

Economic Development 

Insurance – SB 418, and its companion HB 505, would revise requirements for insurance, especially the requirements relating to hurricane losses. If passed, SB 418 would allow insurers to file personal lines residential property insurance rating plans based on windstorm construction standards, limits requirements to notify customers of premium increases less than $10, allow electronic transmission of insurance documents, and revises the mandated deductibles that must be offered for hurricane loss, among other provisions. The companion bill HB 505 includes the same components, except the proposal to revise mandated deductibles. To see more details about the proposed changes of each bill, and how they differ, review the bill analyses for SB 418 and HB 505. SB 418 is in its last committee and HB 505 has two more stops. 

Education

Expanding School Choice – HB 1 will greatly expand the Florida Tax Credit Scholarship (FTC) and the Family Empowerment Scholarships (FES-EO), making it available to any student eligible to be enrolled in kindergarten through Grade 12 at a Florida public school. Parents would become eligible to use an empowerment savings account to customize their child’s education through the purchase of authorized expenses, including private school tuition; contracted services by a public school or school district, such as classes; and tutoring services. In the first year, there will be 20,000 Personal Education Program (PEP) scholarships under FTC. That number will increase by 40,000 students in each of the next three years. The bill also increases the number of students with disabilities served under the Family Empowerment Scholarship for students with disabilities (FES-UA) by increasing scholarship growth rates from 1 percent to 3 percent of Florida’s exceptional education students, annually.  While the FTC and FES-EO are available to all students, the bill keeps a “priority” for students with household income levels below 185 percent of the federal poverty level.  It adds a second priority for students with household income levels below 400 percent of poverty.  A priority of Speaker Renner, HB 1 has already been approved by both chambers.

EASE Grants — Several bills have the potential to influence the Effective Access to Student Education (EASE) Grant Program, a student voucher program that supported 37,705 students with an award of $2,000 each during Fiscal Year 2022-23. As changes to the EASE program are considered, it should be noted that its fiscal and economic impacts are well documented. Discussed in our report, every dollar invested in the EASE Program generates a return of $2.48 in tax revenues.

SB 1272 and HB 1019 would present EASE grants to full-time degree-seeking undergraduate students enrolled at independent, nonprofit universities formerly eligible for the Access to Better Learning and Education (ABLE) Grant Program—a program repealed by the Legislature in 2021—or enrolled at a for-profit, accredited college or university located in Florida. To learn more about the impacts of this legislation, review this bill analysis. This week, SB 1272 was voted favorably by the Senate Education Postsecondary Committee, and its companion has not yet been voted upon in the House of Representatives.

Currently, EASE grants are eligible for use at 34 independent nonprofit colleges and universities in Florida. HB 1247 proposes tying institutional eligibility for participation in the EASE program, and the amount of money a school can receive, to performance benchmarks. For minimum funding, this bill would require institutions to meet or exceed three out of five minimum benchmarks for the following metrics: access rate, affordability rate, graduation rate, retention rate, and postgraduate employment or continuing education rate. If this bill passes, students at seven schools would lose EASE grant vouchers, and 12 of the 27 remaining eligible schools would be listed as Tier 2, with students at these schools receiving smaller vouchers than the students at other EASE eligible schools. The bill also creates new transparency and disclosure requirements that will require sharing data about performance metrics with students. No committee has yet to vote on this bill.

Environment

Trails and Wildlife Corridor – SB106 and HB 915 would appropriate $200 million for SUN Trail projects with a focus on coordinating with the Florida Wildlife Corridor, which was provided $300 million for land purchases by the 2022 Legislature. The bill also increases required annual trail funding from $25 million to $50 million.  A priority of Senate leadership, the SB 106 passed the full chamber unanimously the first week of session.  HB 915 has cleared one committee.

Smart Justice/Public Safety

Problem Solving Courts – SB 508 and HB 1277 are identical bills. They propose revising the coordinators' responsibilities of treatment-based drug court programs by requiring the collection of specific data and producing annual reports to the Office of the State Courts Administrator. These bills also make several changes to particular programs involved in these treatment-based drug court programs. These changes include updating the admission requirements for specific programs, revising eligibility requirements for voluntary admission into certain substance abuse programs, and authorizing courts to determine the length of time a person may be admitted into a certain program. Review the bill analyses to learn more about the impacts of this legislation. HB 1277 is up in its first committee in Week 3 (3/21) and SB 508 has unanimously passed the Judiciary Committee and Appropriations Committee on Criminal and Civil Justice Committee.

Juvenile Justice – SB 7014 and HB 939 would transfer the responsibility of educating students in residential commitment programs from the school district to a new, statewide Florida Scholars Academy operated by the Department for Juvenile Justice. The Florida Scholars Academy would operate similarly to a self-contained district—led by a superintendent—and would operate with a recurring $12 million from the General Revenue Fund to the Department of Juvenile Justice. To learn more about the Florida Scholars Academy, review this bill analysis.  Both SB 7014 and HB 939 have being approved by one committee and the House bill is on the agenda in its second committee in Week 3 (3/21), 

Health & Aging

Telehealth – A bill supported by Florida TaxWatch research—SB 298—passed its second committee in Week 2. The bill would expand the definition of telehealth by including audio-only phone calls.  There have been numerous other bills touching on telehealth filed this session, including ones to included genetic counselors and medical marijuana patients.  There is even a bill to allow veterinarians to use telehealth to treat animals.

Pharmacy Benefit Managers- SB 420 and HB 203 bills further define the various civil penalties for Pharmacy Benefit Managers (PBM). These bills require the Office of Insurance Regulation to conduct examinations of PBMs when necessary and determine whether any violations of specified acts, as defined in each of the bills, have occurred. HB 203 defers from SB 420 by providing additional prohibitions of PBMs from denying pharmacies & pharmacists the right to participate as contract providers, prohibits health insurers & PBMs from engaging in acts relating to covered clinician-administered drugs, and prohibits PBMs from engaging in certain acts against patients as well. There are no bill analyses for these bills at this time. The Senate bill was referred to the Health Policy; Banking and Insurance; Fiscal Policy committees. The House bill is in the Healthcare Regulation Subcommittee.

Government Efficiency and Accountability

Budget

House and Senate budget proposals released

The Legislature is also moving very quickly on the new state budget.  Both chambers’ appropriations bills were released this week.  The House version carries a price tag of just under $113.0 billion, while the Senate proposes $113.7 billion.  This compares to current spending of $110.2 billion and the Governor’s recommendation of $114.8 billion.  

The two chambers are remarkably close on many of the details, but there are differences to be worked out.  

State employee pay raise - The Senate provides $513 million for a 3 percent raise for all employees and an additional 5 percent for job categories including accountants, auditors; IT, lab techs, attorneys, and nurses.  The House doubles that, providing $1.1 billion for a 6 percent across-the-board increase and additional pay for corrections workers.

Hurricane Relief - The Senate creates a $350 million Hurricane Recovery Grant Program for the mitigation of local and county revenue losses and operating deficits; infrastructure repair and replacement; and debris removal.   The House offers $25 million.  Both budgets provide $106 million for hurricane-related beach renourishment.

School Funding - The House and Senate both put an additional $2.1 billion into the public school funding formula, increasing per student spending by approximately 5 percent.   $1 billion of the increase is courtesy of local property owners, as the Required Local Effort millage rate is not rolled-back, despite to large increase in taxable value (12%).

Paydown Debt - Florida TaxWatch has recommended that the state use some of the excess non-recurring revenues available to retire state debt ahead of schedule to cut interest cuts.  Both chambers want to do that, the House provides $137 million and the Senate commits $400 million.

Budget Stabilization Fund -  The House would transfer $1.3 billion from General Revenue to the BSF, while the Senate would transfer only $500 million.

 Member Projects - The budgets are also chock full of local member-requested projects, more than 1,000 projects in each budget.  

New General Revenue estimates add $7 billion for the next budget

In what has been a regular occurrence, the Florida General Revenue (GR) Estimating Conference significantly increased the estimate of the amount of GR that will be collected. This is the sixth conference in a row that has produced a rosier revenue forecast. The latest estimating conference, held March 13, increased the estimate for FY2022-23 and FY2023-24 by a total of $7.06 billion. This is more good news for legislators who are currently in the process of developing the next state budget (FY2023-24.) Despite a gloomier new national and state economic forecast, which includes a mild recession and continued worries including inflation and housing, GR collections have exceeded expectations by almost $3 billion in the first six months since the August 2022 estimates. Actual collections have now bested estimates for 30 consecutive months. The forecast continues this through the last four months of the current fiscal year. As a result, the GR estimate for FY 2022-23 was increased by $4.27 billion. And while the conference is predicting a “downshift” next year that will reduce collections from this year’s windfall level, the new estimate for FY2023-24 was still increased by $2.78 billion from the August estimate.