On March 19 Congress passed the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), a $2 trillion package of relief funds to address the impacts of the coronavirus pandemic. The legislation covers a wide range of initiatives across program areas. This is an overview of three key provisions in the CARES Act with estimates of Florida’s share of funding.
The CARES Act includes a $150 billion Coronavirus Relief Fund (CRF) for states to address the impacts of the coronavirus crisis. The CRF includes $3 billion for Washington DC and U.S. territories and $8 billion for Tribal governments. Each state will receive at least $1.25 billion, and a portion will be shared with local governments with populations over 500,000.
Florida is expected to receive $8.3 billion, nearly $2.5 billion of which will go to local governments. These funds, which will be available through the calendar year, can be used to cover the costs that the state incurred and extra spending necessitated due to the crisis. Local governments will have to submit a certification to the Department of the Treasury that the proposed uses are in accordance with the stipulations in the CARES Act in order to receive the funds.
The CARES Act provides $30.75 billion to support states’ K-12 and higher education systems. These funds will be available through September 30, 2021, covering the entire 2020-21 academic year.
The allocation for each state is based on its share of Title I and Pell Grant students. Florida is estimated to receive a total of $1.7 billion:
The CARES Act provides for one-time payments to individuals and families to help provide an additional boost to incomes as people experience widespread economic uncertainty. Payments will be $1,200 per individual and $500 per child, phasing out for individuals with incomes above $75,000 and married couples with incomes above $150,000. The average rebate amount for different income groups in Florida is estimated in Figure 1.
Florida’s economic makeup and tax structure make the state particularly vulnerable to economic fluctuations, and by most estimates the COVID-19 recession will cause a massive economic disruption. While it is unclear exactly how much Florida’s revenue and economic activity will be impacted, looking at the state’s economy and at the previous recession can provide some perspective.
Almost 80 percent of Florida’s general revenue comes from the sales and use tax, creating a very unstable base for Florida’s tax system. Of particular concern is Florida’s reliance on tourism spending. During FY 2017-18, sales tax revenue generated by tourists totaled over $3.22 billion and accounted for 10 percent of Florida’s total general revenue. In its most recent Long-Range Financial Outlook, the state’s Office of Economic and Demographic Research noted that “tourism-related revenue losses pose the greatest potential risk to the economic outlook.” It also provided a list of threats to tourism including two of note: “disease outbreaks” and “federal policy or administrative changes that make it harder or less attractive to travel.”
The exact amount of revenue losses that Florida will incur due to the coronavirus crisis is not yet known, but it is likely to be significant. In the three years between FY 2006-07 and FY 2008-09, Florida’s general revenue decreased each year (see Figure 2). In total, Florida lost more than $6 billion in revenue, with the greatest drop of 12.8 percent occurring between FY 2007-08 and FY 2008-09. With the social distancing measures and “stay-at-home” orders limiting travel, the closing of Florida’s state parks and tourist attractions, and massive job losses, the impact on state revenue will likely be much more severe this time around.
Moody’s Analytics chief economist, Mark Zandi, has described the COVID-19 recession as an “economic tsunami” with no historical precedent. The coronavirus has caused a sudden stop in economic activity. The country has seen the first wave of impacts with job losses in key industries. Moody’s estimates that nationally 18 million jobs have been impacted, many in the leisure and hospitality and travel industries, both a significant part of Florida’s economy.
This is evident in the unprecedented number of unemployment claims filed by Floridians in the past few weeks. Figure 3 below shows weekly unemployment claims between December 2007, the official start of the Great Recession, and the last week for which data is available, March 28, 2020.
The more than 228,000 claims filed the week of March 28 far surpasses the peak of claims filed during the height of the Great Recession, which at that time had been the highest number of unemployment claims the state had seen in decades. The Economic Policy Institute (EPI) projects that 1.3 million jobs will be lost in Florida (17 percent of total private-sector employment), with a projected unemployment rate of 15.5 percent for July 2020. By comparison, Florida’s unemployment rate reached a high of 11.3 percent in January 2010.
EPI also indicates that the leisure, hospitality, and retail sector accounts for a third of private-sector employment in Florida. These low-paying jobs already had many of Florida’s workers in a precarious financial state, as wages were hardly enough to keep up with the state’s rising cost of living. United Way’s ALICE report shows that 46 percent of Florida’s families did not have enough income to meet basic needs. The prospect of long-term unemployment will be devastating for these families.
Moody’s also estimates a $10 trillion decrease in household stock wealth, half of which is owned by baby boomers. In a recent webinar, Zandi noted that 25 percent of the assets owned by people between the ages of 50 and 70 is in publicly traded stocks. As the value of these assets decrease, spending by this age group will constrict, which in itself will have a considerable impact on the national economy. In Florida, this age group constitutes over a quarter of the population (26 percent) – a loss of wealth and consumer spending among this group will have ripple effects throughout the state.
The CARES Act provides much-needed resources to address urgent needs as states face uncertainty. But, unlike the state aid provided in the previous recession through the American Recovery and Reinvestment Act of 2009, funding in the CARES act is short-term. The CRF funds must be expended by December 30 of this year, the education funding covers just one academic year, and the individual refunds are a one-time payment. Florida’s workers, families, and communities will be living with the economic fallout from the coronavirus crisis for much longer.
During the Great Recession, state revenue losses occurred over multiple years, and the impacts were felt far beyond the official end date of the recession. In fact, Florida continues to be impacted by the Great Recession, as the state’s investment in public services remains below pre-recession levels. Even when the overarching economic indicators showed that Florida’s economy was on a rebound, there were still communities who were left out of the economic growth: workers in low-paying industries, communities of color, and Floridians with low income.
The indicators discussed above point to a recession unlike any other the nation has experienced. This calls not only for increased aid to meet Floridians’ needs during crisis, but also to reevaluate the Sunshine State’s values and priorities so that the economic foundation provides access to opportunity for all Floridians. While the CARES Act is a critical and needed intervention, it is only the beginning of what the state will need in order to stave off severe cuts to programs and services and make proactive investments in the future.