April 25, 2017

Major Differences Remain as the Legislature Approaches Negotiations on the State Budget

As the Florida Senate and House enter their annual budget negotiations, there are a variety of differences throughout the budget. The differences are both tangible and philosophical. In part, each budget is drafted specifically for the purpose of negotiation and does not reflect the actual position of its chamber. In other cases, budget issues represent a strongly-held position of a chamber and will be difficult to negotiate.

This post focuses on a few of the major differences between the house budgets.

Difference #1 – The Bottom Line

Overall, the Senate budget proposes $83 billion, a $1 billion increase over the current state budget, while the House proposes $81 billion, a reduction of $900 million.

The House bases its reduction on the long-range financial outlook of legislative economists that project a shortfall of $1.3 billion in the FY 2018-19, with a $1.9 billion shortfall the year after that. To be clear, there are sufficient revenues projected for this year and the following two years to fund critical state needs, even with population growth. The shortfalls do not occur until other priority needs and revenue adjustments are included.

Revenue adjustments are kind of a big deal. In this fiscal year alone, the corporate income tax credit doubled from $1.4 billion to $2.8 billion. To be clear, this represents $2.8 billion in taxes that don’t have to be paid to the state. In total, tax breaks total almost $20 billion, including about $5 billion in consumer tax exemptions for groceries, prescription drugs and nonprescription drugs. The shortfall correlates directly to the growth in the corporate income tax break.

Difference #2 – Funding for Water Storage South of Lake Okeechobee

One of the highest priorities for the Senate is the creation of water storage facilities south of Lake Okeechobee to mitigate the algae blooms that devastated the economies of communities southeast of the lake. Senate Bill 10 directs $64 million in FY 2017-18 for acquiring land and implementing existing plans, as well as a recurring $100 million for reservoir projects starting in FY 2018-19. All these funds are derived from the trust fund dedicated to land acquisition for environmental preservation purposes. In addition, the bill allows the state to issue up to $1.2 billion in Florida Forever bonds for land acquisition, as well as planning, construction, maintenance and operation funds for the reservoirs.

The House does not have a corresponding bill.

Difference #3 – Medicaid Funding

The Senate anticipated that the federal government would continue to fund charity hospital care at some level and included this funding in its budget. The House did not include comparable funding. The governor announced a deal with the federal government to fund $1.5 billion for this purpose as each chamber was voting on its budget. State sources suggest that, of this funding, approximately $900 million will be paid from federal funds with a $600 million state match. No formal details regarding the nature of the funding or requirements related to the funding have been released. Also, the Senate and House have not indicated whether the federal funding will be added to funding currently provided for Medicaid or whether it will supplant this funding to move state funds to other budget issues.

Difference #4 – Funding for Public Schools

The House proposes funding public schools at $7,224 per student, a 0.27 percent increase over current-year funding. The Senate proposal is $7,414 per student, a 3.9 percent increase in total funding. The difference between the two proposals is that the Senate public school funding includes increased local property taxes that have resulted from increasing home values. Accordingly, $535 million of the Senate increase comes from local property taxes. The House holds property taxes for school funding at the same dollar amount as the Legislature used in its current year budget.

Difference #5 – Funding for State Universities

Senate President Negron conducted a listening tour of the state universities and concluded that additional funding is necessary to improve the universities’ standing among their peer institutions. The Senate’s proposed budget increases state university funding by $361 million (15 percent), while the House’s proposed budget reduces such funding by $228 million. This creates a funding disparity of almost $600 million. Both chambers hold student tuition and fees at current-year levels.

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