Early estimate pegs Florida with $7.02 billion surplus in upcoming Fiscal Year

Florida’s financial outlook for the upcoming fiscal year indicates an estimated $7.02 billion in leftover funds for Fiscal Year (FY) 2024-25.

State economists anticipate having an ending balance of $7.6 billion after accounting for all expenditures, including the minimum reserve, recurring base budget, critical needs budget drivers, other high-priority needs budget drivers, and revenue adjustments. According to the State of Florida Long-Range Financial Outlook Draft Report, which will be presented to state officials later this week, Revenues for FY 2024-25 in the General Revenue Fund are expected to reach approximately $47.6 billion.

After accounting for recurring expenditures and other mitigating factors, the state anticipates an ending balance of $7.65 billion. Adjustments in taxes and fees are expected to decrease revenue by $647 million, while trust fund transfers will contribute $20 million, resulting in a net revenue adjustment of -$627 million. Consequently, the projected surplus for FY 2024-25 stands at $7.02 billion.

“The State of Florida’s General Revenue Fund collections have continued to exceed expectations, in part because the previously expected recession failed to materialize during the 2022-23 fiscal year,” reads the report. “Within the Outlook period, projected expenditures are less than the General Revenue funds expected to be available. While surpluses are projected for all three fiscal years, the ending balances decrease each year of the forecast.”

The long-range outlook reflects diminishing surpluses for the state. While the fiscal year 2024-25 is projected to yield a surplus of $7.02 billion, forthcoming fiscal spillover gradually contracts in subsequent years. In fiscal year 2025-26, the projected surplus decreases to $5.4 billion after revenue adjustments, and by FY 2026-27, it further reduces to $2.7 billion.

Per the report, the state’s reserves — not its surplus — for FY 2023-24 is estimated to be $13.6 billion, including $8.8 billion of unallocated General Revenue.

The state’s reliance on entities like the Florida Hurricane Catastrophe Fund and Citizens Property Insurance Corporation presents potential future financial risks, as their ability to meet obligations hinges on market conditions, according to the report.

Moreover, federal Medicaid funding reductions and ongoing lawsuits against the state could disrupt finances. Two proposed constitutional amendments may also alter the state’s fiscal landscape. One suggests partisan school board elections, while the other aims to protect fishing and hunting as public rights.

“Florida’s economic stability is vulnerable to the potential impacts of natural disasters, especially major hurricanes,” reads the document. “This vulnerability can take several different forms, but one of the most immediate is to the state’s long-term financial health. Although there is a widespread misconception that hurricanes are somehow beneficial to the state from an economic perspective, state government typically has expenditures greater than any incremental increase in the revenue estimate.”

Broadly speaking, Florida’s economic outlook is expected to remain stable, with recent forecasts showing resilience as the anticipated recession in early 2023 did not materialize, leading to a modestly stronger-than-expected FY 2023-24. However, inflationary pressures are assumed to persist until FY 2025-26. The state’s GDP growth has seen fluctuations but is expected to slow down slightly, and personal income will stabilize at lower growth rates.

Employment levels have mostly recovered from a pandemic dropoff, and the unemployment rate is expected to rise gradually. Florida’s demographics, characterized by an aging population, will pose challenges for policymakers, economists fear, with more than 65 percent of Baby Boomers expected to enter retirement by 2030, impacting the state’s economy, labor force, healthcare, and tax revenues.