Florida lawmakers will begin meeting this week in Tallahassee, where there will be close attention on the state’s next budget.
It’s an early start for committees ahead of the full 60-day session which does not begin until the beginning of March.
Law requires the Legislature to pass a balanced, debt-free budget within the timeline of session.
THE BALANCE SHEET
It’s important to understand the makeup of the budget in order to understand the impacts of a shortfall.
The state’s fiscal year runs July through June, with the next budget passed in March set to go into effect July 2021.
Last year’s budget totaled $91.1 billion, but Governor Ron DeSantis swept through with line item veto power, rejecting nearly $1 billion in spending.
Education and Healthcare expenses, such as K-12 and college funding, and Medicaid funding, collectively make up nearly 70% of the state’s spending.
In a state anchored by tourism, sales tax generates a healthy amount of revenues for Florida.
VISIT FLORIDA, the state’s tourism marketing agency, reports in 2018 tourists spent $94 billion in Florida, contributing to $14.1 billion in federal tax revenue and $12 billion in state tax revenue generated that year.
State revenues are generated from other sources as well, including property sales and other miscellaneous fees.
The year 2020, however is different.
“The tourism industry, especially in Central Florida, it was devastated,” Jimmy Patronis, Florida’s Republican Chief Financial Officer said. “When you look at the convention and hotel business, it was crippling at such a huge revenue center for the State of Florida. When airlines aren’t filled, the convention centers aren’t filled, they aren’t eating at restaurants, not renting cars, not buying sundries at the convenience store, all of those things have direct impact on state revenue.”
For comparison, in normal times, Phil Brown, Executive Director of Orlando International Airport, said rental cars alone generated $100 million per year for the airport and parking fees could generate up to $70 million per year.
Both of those operations nearly stopped during the height of the shutdowns.
By April 2020, Patronis said at the time the state was already seeing $700 million in projected tax losses. VISIT FLORIDA estimated at that point hotel demand was down 76%, losing $1.5 billion in economic impact.
In May 2020, Orange County officials were already estimated $637 million in losses from canceled conventions at the Orange County Convention Center alone.
With the pandemic cratering tax revenues, state economists predict Florida is losing $3.3 billion over the next two years.
That is a funding loss that will require lawmakers to reexamine the next budget.
HOW TO MAKE END’S MEET
The pandemic is producing polar opposite pleas. Some say the state needs to boost aid and support, while others are readying financial guillotines for extensive cuts.
In crafting a budget, lawmakers will have to take into consideration requests from colleagues, social efforts, the governor, and the state as a whole.
“The Governor’s Office of Policy and Budget is reviewing the Legislative Budget Requests of the agencies which were submitted several months ago,” Cody McCloud, Press Secretary for Governor Ron DeSantis told Spectrum News in a statement. “The Governor and staff continue to develop the Governor’s budget priorities for the upcoming fiscal year. Pursuant to s. 216.162 F.S., the Governor will present his budget recommendations to the Legislature no later than 30 days prior to the start of the 2021 Legislative Session, scheduled to convene on March 2nd.”
Even amid calls for extending unemployment benefits, affordable housing funding, and further investments into health care costs related to COVID-19, there are at least two approaches emerging when it comes to cover the budget shortfall.
Call them the “Cuts” and “Recoup Cash” plans.
CUT CUT CUT
Republican State Representative Anthony Sabatini (District 32, Lake County) believes the simplest approach is broad cuts.
“I welcome budget cuts, I think there’s too much government in Florida,” Representative Sabatini said.
Sabatini’s eye is first on fellow lawmaker’s ‘pet projects’.
“There are member projects and what these are, legislators who file individual member projects – I want $1 million for this, $2 million for that, generally things for a good cause but not of statewide concern,” Sabatini said. “If we do that, there’s a $1 billion savings, that’s what DeSantis cut last year and didn’t have to cut teacher pay raises and other items.”
The numbers show the state is having to spend far more than it expected when it passed the current budget during its 2020 session that ended in March just before the ignition of the state shutdowns and pandemic spread in the state.
“I think we’ll see those costs decrease over time, but that doesn’t mean we need to be spending the same in other arenas, we need to be cutting in other parts of government,” Sabatini said.
Sabatini is also promising an across-the-board cut in each state agency’s budget ranging from 2% - 5%.
Republican colleagues however are critical of such a move, saying it won’t go far enough.
“When that $3.3 billion shortfall is calculated, that’s based on recurring funding, member projects are not recurring funding,” Republican State Representative Randy Fine (District 52, Brevard County) said. “That $3.3 billion, if we did $1 billion of member projects, that would create a $4.3 billion hole, there’s no savings in that hole getting rid of that funding that’s not assumed to have happened.”
Fine, however, does agree that cutting is the best measure to get the state’s next budget in check.
“I think it’s an exciting opportunity,” Fine said. “Our budgets have a lot of fat in them. There are programs that just happened this way for years and decades and there’s never the financial discipline to actually cut anything because there’s always plenty of money. Now, we’re forced to go through the valuable exercise where we ask what are the things the state actually should do, and there are many things we’ll conclude no.”
Short on specifics, Fine did say lawmakers are likely to review spending top to bottom.
“I’ll be looking for opportunities to eliminate things we simply don’t need anymore or can’t afford,” Fine said.
Fine is Chairman of the House appropriations committee that oversees nearly $24 billions in education funding.
“I think you to have to look at particular programs,” Fine said. “For example, our state spends about $50 million a year giving reduce tuition to illegal immigrants. If you live in Georgia and want to go to Florida State University, you pay three times as much as someone who comes from Russia and shouldn’t be here. We spend $150 million a year giving college scholarships to private schools, we spend $100 million a year for paying for two universities that cost $200,000 a degree, whereas University of Florida is $28,000.”
DEMS: DON’T CUT, COLLECT
While some republican lawmakers maintain cutting costs will be the most practical approach to filling the budget shortfall, democrat lawmakers say cuts aren’t necessary.
“That’s the first inclination many people have, is cutting, but we have seen our safety net, social service infrastructure strained to the breaking point with the pandemic, so I don’t think cutting is the way to go,” said Democratic State Representative Geraldine Thompson (District 44, Orange County).
The proposal Thompson and other lawmakers, including Democratic State Representative Carlos Guillermo Smith (District 49, Orange County) are pushing is for the state to start collecting revenue it’s previously not gone after.
“There are ways we can meet the shortfall through things such as online sales tax,” Thompson said.
Whether a company pays sales tax for online purchases depends on whether that company has a physical brick and mortar presence in Florida.
One example is Amazon.
For years Amazon is did not collect nor redirect sales tax for items purchased by Floridians, until Amazon started opening physical distribution centers in the state.
The opening of a physical presence in Florida automatically forced sales tax collection process.
“That sales tax that should be collected there is based on the honor system,” Florida Chief Financial Officer Jimmy Patronis said. “There’s some leakage out there, I don’t’ know if sales tax not being collected through those are enough to make up the shortfall.”
Last year Republican State Senator Joe Gruters filed legislation that would have required companies to collect sales tax for online purchases. While a committee blocked the bill from further consideration, a Florida Senate review estimated the measure could have produced $421 million in the first year.
“Collecting an online sales tax is just enforcing the law we already have and it’s leveling the playing field for the little person so large corporations can’t continue to have this unfair advantage,” Smith said.
Democrat lawmakers are also looking to raise revenues by ending programs they say that provides corporations with significant tax returns and to skirt tax laws.
The first measure Representative Smith is pushing is for corporations to be required to file a single tax return.
“They will have a single tax bill for all of their businesses and subsidiaries which for the time being, what they’ve taken advantage of in the State of Florida is being able to hide assets and basically shield their businesses from taxation,” Smith said.
Smith has long criticized the legislature and governor providing more than $540 million in corporate tax returns at the height of the pandemic shutdowns.
“This is why it’s really important that we think outside of the box and take this budget gap seriously,” Smith said. “As we are seeing declining revenues due to the coronavirus, we’re also seeing the needs of everyday Floridians is escalating.”
THE CALLS FOR MORE STATE AID
Every approach to the budget is expected to be divisive. Not only how to make up the budget shortfall, but also calls for expanding government services.
In a year that’s seen skyrocketing unemployment and a benefit system continually overwhelmed, many families are still far from getting a financial footing.
There are calls to expand unemployment benefits and housing support, in addition to other aspects related to the pandemic.
Congress passed a second round of COVID-19 financial assistance in December, providing $900 billion for a series of assistance programs.
That includes extending federal $300 weekly unemployment benefits until March 14, 2021.
Florida has one of the smallest unemployment benefit programs in the nation, providing a standard of up to $275 per week for up to 12 weeks.
That window was extended to 19 weeks as of January 1, 2021 per state law which automatically requires an increase in aid based upon the unemployment rate. Those extended state benefits, however, are available only to newly qualified applicants, not those who are already out of work.
Democrats are pushing to extend permanent state unemployment benefits to $500 per week for up to 25 weeks.
“We have millions of Floridians who have been pushed into poverty or unemployment who are facing eviction who need relief from the state,” Smith said.
“I think making sure people have a roof over their head, food on the table, appropriate clothing for them and their children is the investment we need to make,” Thompson said.
Expanding unemployment and housing assistance benefits are costs Democrat lawmakers say the state can’t afford not to pay.
They are costs Republican lawmakers say the state can’t afford to give.
“I look at every dollar we give to one person is a dollar we can’t give to another, and I take it even further, when you give a dollar to someone who doesn’t need it, you steal it from someone who does,” Fine said.
“If you ratchet up unemployment benefits you actually exacerbate unemployment,” Sabatini said. “You’re looking at making people incentivize through federal and state unemployment payments not to look for a job.”
Osceola and Orange counties continue to lead the state in unemployment, where tens of thousands are facing extended furloughs, reduced hours, and layoffs.
The state’s unemployment benefits program is primarily funded by taxes assessed onto companies. State Representative Fine said increasing unemployment benefits therefore increasing unemployment taxes on businesses is not something the state should do.
Thompson rebuts, saying companies in Florida already pay far less than businesses in other states.
Florida’s unemployment fund has since dwindled since March 2020 when it had about $4 billion. According to U.S. Department of Treasury, Florida’s unemployment fund, as of January 2021, has $864 million.
Florida Department of Economic Opportunities says its paid more than $19.9 billion in unemployment benefits to more than 2 million Floridians since March.
The bulk of that funding, $16 billion, is from federal funding, while the state has paid $3.8 billion in state funds.
Florida also received more than $5 billion in CARES Act funding from the federal government, to fund programs to test Floridians for COVID-19, purchase personal protection equipment for front line workers, as well as housing assistance, and other programs.
HOUSING PROTECTIONS AND ASSISTANCE
At some point state and federal eviction protections will expire.
RELATED: COVID-19 Relief Bill Eviction Protections Short Term, Do Not Kick In Automatically
The Sadowski Fund is meant to help support affordable housing programs, but the money is often used for other purposes.
RELATED: Series: Central Florida’s Affordable Housing Crisis
Last session it was fully funded for the first time in 20 years, however Governor DeSantis blocked that funding from being used, instead relying on CARES Act funding.
“There was $230 million of Sadowski dollars that were going to be used for affordable housing,” Florida Chief Financial Officer Jimmy Patronis said. “The governor vetoed utilization of those dollars. What he ended up doing was, using CARES Act dollars because guidance from the treasury allowing Cares Act to be used for affordable housing. Where we could get innovative and creative using federal dollars to replace those state dollars was ways that we knew next legislative session would appreciate having a little extra money.”
Getting creative may be exactly what lawmakers have to do to reach a compromise to pass a budget.