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A $2.7 billion Florida budget shortfall looms as coronavirus unleashes a tide of red ink

John Kennedy
Sarasota Herald-Tribune
Gov. Ron DeSantis could be presiding over three years of spending cuts, including a tide of red ink when he seeks reelection in 2022.

TALLAHASSEE – Florida lawmakers approved a three-year financial outlook for the state Thursday that is its worst since the Great Recession, with a $2.7 billion budget shortfall looming next year certain to force cuts in schools, health care and social programs.

The Florida Constitution requires that the Legislature formally adopt the three-year outlook annually. While Thursday’s action included no real discussion of what should happen next to bring revenue and spending into balance – which also is a constitutional mandate – the most obvious path forward includes spending reductions.

The outlook amounts to a trail map filled with financial markers showing how the coronavirus sent Florida’s economy into an abyss.

“The big driver is clearly the pandemic,” said Amy Baker, coordinator of the Legislature’s Office of Economic and Demographic Research, which prepared the 132-page outlook.

The most jarring number is the $2.7 billion shortfall in the 2021-22 year, followed by forecasts that revenue comes up $1.9 billion short the next year and $1 billion under state needs in 2023-24.

It sets up the Legislature for an extended period of bare-bones spending.

And it also puts Gov. Ron DeSantis on course to seek reelection in 2022 with the state still awash in red ink from a COVID-19 crisis he is attempting the steer Florida through, based largely on direction from President Donald Trump.

The state last faced similar financial troubles during the 2008 housing collapse, when a $3.3 billion budget shortfall eventually led to years of spending reductions and increases in the state’s cigarette tax, motor vehicle taxes and fees and courtroom charges.

Tax and fee increases will be an option for lawmakers to consider when they start work on the budget next year, along with a delay in tax breaks handed out to corporations and consumers, and with reductions in education and health and human services, the biggest spending areas.

Sweeps of state trust funds are likely and could yield $300 million – with affordable housing and environmental funds frequent targets of the Republican-led Legislature even in good years. A push could be soon underway again to enact a new gambling compact with the Seminole Tribe, which could annually take in $350 million for the state.

“We assume you’ll have a mixture of different things,” Baker said of the balancing act facing lawmakers.

The roots of the sobering three-year forecast were seen just a month ago, when state economists slashed a stunning $5.4 billion from expected state revenue over the next two years, with tax collections cratering as the coronavirus froze tourism and forced consumers to sharply cut household spending.

The state’s current $92.2 billion budget is largely bolstered by $5.8 billion in federal CARES Act funding that, while not plugging revenue losses, at least is covering much of the state’s cost of battling the pandemic. More federal money also is expected.

Baker is forecasting that the state’s 11.3% July unemployment rate will slide to 7.8% during this last quarter of 2020, easing some state spending on Medicaid and financial assistance programs for needy families, as more people rejoin the workforce.

But the 4% unemployment rate that economists consider full employment is not likely to be seen again in Florida for almost a decade, Baker told lawmakers.