One year after the first wave of the coronavirus pandemic washed over the world, Florida Chief Financial Officer Jimmy Patronis revealed an inside look at the initial financial fears that gripped the state’s top money managers as they watched tourist revenue dry up virtually overnight. And he outlines Florida’s financial future as the state looks toward a return to normalcy.
In a wide-ranging interview with The Capitolist, Patronis gave an inside look at how his understanding of the pandemic evolved and how his thinking shifted in the pandemic’s earliest days. And he lavishes credit on state leaders and money managers who had the foresight to prepare for disaster.
In January 2020, after hearing directly from then-FEMA director Pete Gaynor that the SARS-COV-2 variant had already started to gain a likely irreversible foothold in the United States, Patronis, who also serves as the state’s Chief Fire Marshal, said his thinking was initially focused on a direct response to the threat. His first instinct was to make sure fire stations across the state were adequately prepared to deal with the mass contagion. It quickly became obvious that the state’s first responders were seeing the same thing and were already making preparations.
“As we started making the rounds, much like we do with hurricanes, we quickly realized what our country was on the verge of facing, and then the gravity set in on what that means for our economy that is so dependent on tourism,” Patronis said. “The problem we ran into was that people stopped flying into Orlando and Miami, which quickly had a snowball effect on adjacent businesses — like car rentals, hotels, and restaurants — resulting in layoffs that devastated Florida’s hospitality industry.”
As the state’s major tourist destinations began to voluntarily shut down, the ripple effect began to spread through Florida’s economy, and state officials grew increasingly concerned over the potential impact. Without a state income tax, Florida relies heavily on tourism and derivative industries to provide a significant share of revenue.
“Disney alone generates over $700 million in sales tax for the State of Florida every year,” he said. “That’s not including hotels, parks, and other venues outside of their physical complex. This is when we started losing sleep at night because Florida depends so heavily on sales tax, and COVID was going to threaten that.”
Patronis, who came from a small business background before embarking on a 15-year career in public service, says he embraces his role overseeing the state’s finances.
“I get excited about holding people accountable and watching over the people’s money,” Patronis said. “There’s a lot of things that we do that people don’t realize: we balance the state’s checkbook — we got three of them — we balance them every night. The legislature passes a budget, the money comes to us, and as the legislature executes how those dollars should be spent, we cut those checks.”
In addition to crediting Governor Ron DeSantis‘s decision to keep the economy open, Patronis lauded the state’s money managers that he helps oversee on the state Cabinet. A combination of sound investment choices and previous decisions by state leaders to pay down debt gave Florida the financial flexibility to make the most out of federal aid. While other states, like New York, which racked up a $15 billion budget shortfall, Florida, by contrast, has a balanced budget requirement and it paid off last year.
“When the first CARES Act passed in last spring, the State of Florida received almost six billion dollars,” Patronis explained. Because the state didn’t need to spend the cash all at once, he says, “Our team immediately invested it. Just through the first CARES Act, we were able to generate about $71 million dollars in interest just in 2020.”
Then there were additional economic benefits that few saw coming. Patronis again credited DeSantis for being willing to take criticism over his decision to keep the economy open.
“While tourism took a hit, we picked up hidden revenues that weren’t anticipated,” Patronis said. “In 2020, we had the most car, boat, and RV sales in the history of the state, and on top of that, housing sales went up 26 percent.”
Patronis said these purchases also translated to other markets, observing that many small businesses saw some of their most profitable years because “nobody was traveling or splurging overseas.”
“When you had all that shutdown of outside U.S. travel, the dollars were still going to be spent,” he explained. “They just didn’t buy items like jewelry and nice things in other countries or vacation spots. They bought it inside the country. These hidden revenue pockets spiked because consumers wanted to continue living a normal life.”
Patronis also credited Ash Williams, who serves as chief investment officer for the Florida State Board of Administration, for his role in working with the CFO’s office to make sure they were doing everything possible to protect pensions that retirees depend on.
“When you saw the stock market tank the way it did, we had weekly calls with Ash Williams who monitors our investments. We have a very diverse portfolio, our pension fund stands at over $180 billion, and we pay out over 600 million in benefits every month,” Patronis noted. “Part of managing a business is working with your management team and leadership to find out what’s happening with people’s dollars that they depend on for retirement, and those were the factors that we were constantly asking that team about.”
“There’s a great team over there, and Williams’s experience dealing with economic crises is what allows Florida to have a pension funded at 86 percent.”
The CFO also lavished praised on state lawmakers who wisely bolstered the state’s so-called “rainy day fund” as the pandemic began to hit.
“The state’s ‘budget stabilization fund’ sits at 1.4 billion, and is there in case we need to stabilize the state’s budget,” said Patronis. “Sometimes that’ll get adjusted by the legislature as it did last year when it passed a $93 billion budget in 2020, leaving $3 billion unobligated. Thanks to their wisdom to not encumber it, that $3 billion that they chose not to spend helped cashflow the state during the downturn.”
During the interview, Patronis repeatedly gave credit for Florida’s financial success through the pandemic to both DeSantis and his predecessor, now U.S. Senator Rick Scott, whom Patronis said handled business recruitment and fiscal responsibility so well. One of Scott’s top priorities as governor was to pay down state debt.
“You had eight years of Governor Rick Scott attacking debt in the state. Governor DeSantis inherited a good economy, before meeting his first real financial test last year,” Patronis said. “And what does Governor DeSantis do? He vetoes a billion dollars, making it clear that Florida would live within its means.”
“I look at what Governor Scott had created, and I look how Governor DeSantis didn’t squander it, and I think this is good for outside corporate America to see how our good leadership structure allowed businesses to do what they need to do,” he continued. “That makes them change their mind from continuing to do business in New York and considering moving to Florida.
“I wish I could take credit for all the tools we have in our toolbox, but there’s some real heavy lifting that took place — even a generation ago — that we’re a beneficiary of today.”
Looking ahead at Florida’s future financial prospects, Patronis weighed in on the potential of a deal being struck between the Seminole Tribe and Florida this session, which he acknowledged could bring in additional revenue that could be used to plug some of the deficit holes left by the virus. The CFO declined to confirm if Seminole Tribe negotiations were happening behind the scenes but acknowledged it’s important to have all of Florida’s financial cards on the table because it will impact how federal dollars are allocated.
“The legislature is looking for dollars just in case what comes from the Feds doesn’t benefit a red state like Florida the way it was structured to benefit a blue state,” Patronis said, addressing the fact that New York’s massive budget deficit will mostly be plugged with federal tax dollars, some of which come from the Sunshine State. “Florida realizes we don’t have the type of ally in the White House we once had, so we have to be prepared to handle a potential disappointment like the [federal] dollars not being as beneficial.
“We do have the good fortune that the Tribe is there with an interest to want to expand what they’re eligible to do in the State of Florida,” Patronis hinted. “We just have to deliberate on the appetite of what we’re willing to allow to take place.”
“I would much rather be in the State of Florida than any other state in the Union,” Patronis said. “When I look at the train wrecks of the finances of a New York, New Jersey or California — where they have shown zero fiscal discipline and their pension funds are upside down…I don’t know why anybody in their right mind who would open up a business in any of these states where there’s so much liability on the books.
“At some point,” Patronis says, “with that type of debt service, there’s going to be a day of reckoning.”