FILE - Florida Senate president Bill Galvano

Florida Senate president Bill Galvano, R-Bradenton

Florida needs a new reserve fund to stabilize its budget reserve fund, one specifically dedicated to stockpiling Federal Emergency Management Agency (FEMA) reimbursements for state expenses in responding to hurricanes, the state’s leading fiscal analyst suggested.

Amy Baker, director of the Legislature’s Office of Economic and Demographic Research (OEDR), told the Joint Legislative Budget Commission (JLBC) that the state has spent more than $1 billion in hurricane response and recovery the last three years but, as of August 30, had only received $211.9 million in FEMA reimbursements.

As a result, she said, projecting the budget impacts of storms and other natural disasters – mercurial by nature – is additionally confounded by the unpredictability of calculating state matches for federal funds and FEMA reimbursements.

A reserve-reserve fund built entirely from the trickle of federal reimbursements, received often several budget cycles after the event, could serve as a dedicated backup to the Budget Stabilization Fund and “help buttress” the state’s general revenue fund, Baker said.

Another option, included in the Revenue Estimating Conference’s updated General Revenue Fund & Financial Outlook Statement, could be loans from the Budget Stabilization Fund as “a more direct source of disaster funding” that could spread the repayment “over no more than the statutorily required five-year period” to better align with FEMA’s erratic reimbursement practices.

The fiscal stress and budgeting uncertainties from hurricanes, as well as simmering trade tensions with China and the European Union and global indications of a slowing economy, are among the reasons state economists in August revised projections to forecast Florida will collect about $867 million less in revenues over the next two years than they estimated in March.

The Revenue Estimating Conference’s updated General Revenue Fund & Financial Outlook Statement reduces the March revenue estimate by $451.6 million for this year and by $416.1 million for fiscal 2021.

As a result, Baker told the JLBC, lawmakers will have a relatively small surplus to work with – an estimated $289.3 million, or 0.8 percent of the general revenue estimate – when they convene Jan. 14 to put together the state’s fiscal year 2021 budget.

The primary reasons cited by the conference for the downward adjustment are changes adopted by the Republican-controlled Legislature in 2018 and 2019 following the adoption of the federal 2017 Tax Cuts & Job Act (TCJA) and the suspended revenue-sharing compact with the Seminole Tribe.

According to the outlook, “The estimated combined effects of legislation passed during the 2018 and 2019 sessions to lower the corporate income tax offset expected increased collections as a result of federal law changes [the TCJA] by slightly over $1.1 billion this year and $704.5 million in fiscal year 2021.”

Among those “combined effects” is a measure adopted by lawmakers during the 2019 legislative session to cap corporate tax revenue at no more than 7 percent above what state economists had projected in corporate tax revenues before the adoption of the TCJA.

Factoring in those revisions, the revised fiscal year 2020 estimate “falls below the prior year’s collections by slightly over $470 million — 1.4 percent — and the revised forecast for FY 2021 “has projected growth of slightly over $1.4 billion — or 4.3 percent — over the revised FY 2020 estimate.”

The Seminoles have discontinued making annual payments to the state until they resolve differences with the Legislature and Gov. Ron DeSantis over gambling at race tracks.

The tribe made its last monthly payment in April. Until a new compact is secured, the state will lose $346.7 million this year in revenues and $360.5 million in fiscal year 2021, according the conference.

Senate President Bill Galvano, in comments to reporters Wednesday after appearing before the Florida Association of Professional Lobbyists conference in Orlando, said it is unlikely the state and the Seminoles will come to an agreement soon.

“We don’t have the revenues from the Tribe,” he said. “I don’t see those revenues around the corner anywhere. And so we’re going to have to plan accordingly.”

The 2017 agreement negotiated by former Gov. Rick Scott extended the Seminole Tribe’s exclusive right to offer blackjack games in its Florida casinos, but made payments conditional on the state's guarantee to “aggressively enforce” prohibitions against other gaming operations offering blackjack.

“Unfortunately the prior administration entered into a settlement agreement and rubber stamped that court decision, which I disagreed with,” he said. “But then, we’re stuck with it.”

When asked to elaborate, Galvano complied: “I’m suggesting that the deal Rick Scott made with the Seminoles is not a good deal,” Galvano said before adding, “I’m not suggesting it. I’m saying it.”

The state doesn’t plan to sue the tribe, Galvano said, but that “doesn’t mean there is not necessarily some legal recourse.”

Meanwhile, he said, lawmakers are already aware that there could be less discretionary money available during the 2020 session than in previous years.

“We’re really very cognizant of it,” Galvano said. “We’re showing some modest surplus now, but modest reductions going forward. If it hasn’t been sent out already, we’re sending out a memo to the Senators that specifically indicates that as we make decisions we’re going to have to keep in mind the out-years.”