Despite $5.4B in forecast revenue declines through 2021, Florida could dodge budget upheaval

By John Haughey
The Center Square
August 19, 2020

(The Center Square) – Florida’s general revenues could fall $3.4 billion short of projections this fiscal year and $2 billion shy of estimates next year, state economists said.

Florida also could see a 10 percent increase in Medicaid enrollment, with a projected 4.36 million residents expected to be enrolled in the program by Dec. 31, fostering a potential $553.7 million budget deficit, economists forecast.

Florida, however, has $4 billion in reserves, is sitting on $5.8 billion in federal Coronavirus Aid, Relief and Economic Security (CARES) Act funds and could avoid dramatic budget upheavals if the U.S. Department of Treasury allows states to use COVID-19 assistance for expenses other than those directly pandemic-related.

That determination likely will remain foggy until Senate Republicans and House Democrats reach an accord on another round of COVID-19 assistance.

“There is a very high degree of uncertainty surrounding the future allowable uses of these dollars by states and local governments,” state economists wrote in the General Revenue Fund Financial Outlook Statement adopted by the Revenue Estimating Conference (REC) on Friday and updated Tuesday.

Without a relaxation by the Treasury, “the Fiscal Year 2020-21 ending balance shown in this outlook will be lower, potentially becoming negative,” the outlook stated.

If some of the $5.8 billion in CARES Act money cannot be used to plug budget holes, the state’s $92.2 billion budget that went into effect July 1 may require extensive amending.

DeSantis said last week Florida’s CARES Act money is “obligated” but not spent. He has not elaborated. Along with the $4 billion in reserves, DeSantis has ordered state agencies to submit plans to trim 8.5 percent from their budgets.

“I think we’re going to be able to get through this budget year without doing a special session,” DeSantis said. “Certainly we’ll be able to get to the end of the calendar year without having to do (a) special session. But some of this will be dependent on the overall health of the national economy.”

As expected, revenue losses are manifested primarily in declining sales tax collections. Of total projected revenue losses, more than $2.5 billion came from a 6.1 percent decline in sales tax collections.

Florida is dependent on sales tax revenues, especially those generated by tourism, which account for nearly $7 billion of the estimated $30.4 billion in sales tax revenues state economists forecast in January.

According to Visit Florida, the state’s tourism marketing agency, the state’s tourism industry suffered an estimated 60.5 percent drop in business in 2020’s second quarter – April through June – with 20 million fewer visitors.

The state’s unemployment rate was 10.4 percent through June, with more than 1 million Floridians out of work. As a result, Florida has paid $2.9 billion in unemployment compensation since mid-March, according to the Florida Department of Economic Opportunity.

The more who are unemployed, the more people lose health insurance and enroll in Medicaid. The $30 billion Medicaid spending plan in the budget was based on 3.8 million enrollees.

The Florida Agency for Health Care Administration said Florida’s Medicaid enrollment increased by 224,375 people, nearly 2 percent, in June. About 4.2 million people now are enrolled, with 4.36 million forecast by year’s end.

The federal Centers for Medicare and Medicaid Services increased the Federal Medical Assistance Percentage by 6.2 percent in March, boosting federal Medicaid payments by $1.6 billion.

That increase expires Dec. 31, however. Without an extension, the state could see a $553.7 million deficit by July 1, 2021, economists project.

Share this story!