Budget challenges loom in coming years

Florida will soon face budget issues, and legislators must address them before they hit home.

That’s the takeaway from a meeting of the Joint Legislative Budget Committee. State budget chief Amy Baker reviewed the Long-Range Financial Outlook with the bicameral panel before it was adopted, noting that normalcy and “stability” have resumed after pandemic funding boosted coffers, and challenges abound as a result.

“After taking account of the budget drivers for Critical Needs and Other High Priority Needs as well as the Revenue Adjustments, the Outlook projects a surplus for Year 1 but shows projected deficits for Years 2 and 3 of the Outlook period,” the outlook reads.

“Further, the $6.6 billion deficit in Year 3 assumes that the $1.5 billion deficit projected for Year 2 will be cleared prior to the start of the new year. The bottom line is that the revenue forecast will not support spending at its recent rate of growth, meaning fiscal strategies continue to be needed.”

The projected surplus for next fiscal year is $6.6 billion in total, or $3.7 billion when reserve allocations are factored in, reversing what was anticipated last year to be a deficit due to the release of contingency reserves and permanent redirects.

However, Year 2 is at negative $1.25 billion, and Year 3 is an anticipated negative $6 billion dollars.

“The bottom line is we continue to see a revenue forecast that will not support spending at its current rate of growth,” Baker said.

The state needs $20.3 billion more in General Revenue, which is 3.4% lower than the $21 billion identified last year, but still presents real challenges for policymakers. That tells part of the story given the accumulation of costs, as the $20.3 billion equates to $28.5 billion in additional costs over the three-year forecast period.

Fiscal Year 2027-28’s shortfall could be unaddressed until the state gets there, but Baker urged legislators to “start tackling” the issue if they don’t want problems to accrue.

Indications are that the process will be a priority.

Chair Lawrence McClure said the House intends to “keep chipping away at this” and work with the Senate on it. Sen. Jim Boyd promised to “work real hard” with the House to do so.

Some issues will be easier to address than others, including the weakening dollar and an aging population.

Higher wages, said Baker, will create “demands on the budget,” a driver “hidden in everything we do.”

Population continues to grow, with a 3% annual increase anticipated through the end of the decade, and all of the growth from “baby boomers” continuing to move into the state.

The “very large senior share” of the population will “pervade” the budget and the economy at large, and dominates all planning forecasts, Baker said, with state costs especially pronounced for people over 85 years of age.

Rep. Allison Tant, a Tallahassee Democrat, noted that shifting demographics have led to school consolidation in Madison County.

While the number of children is still growing, the share is diminished compared to the elderly, Baker noted in response. And “labor market” issues will continue, given working age adults will have to care for both populations.

Black Swan events would present impacts. As has been the case in previous forecasts, multiple of these (such as back-to-back hurricanes destroying property in high-density areas) would force the state to recalibrate planning, though one likely could be weathered with reserves.

Post Views: 0