Brookings 7 th Annual Municipal Finance Conference State Recovery - - PowerPoint PPT Presentation

Brookings

7th Annual Municipal Finance Conference

State Recovery from the Great Recession

July 2018 Ben Watkins, Director of Florida Division of Bond Finance

Page 1

• Florida’s General Revenues declined by over $6 billion or 22%

from FY 2006-2009

• Declining revenues created budget gaps from FY 2008-2012
• Budget deficit reached as high as $5.5 billion in FY 2009

Florida’s General Revenue Decline

$15.7 $16.9 $17.9 $18.8 $19.2 $19.3 $20.0 $21.8 $25.0 $27.1 $26.4 $24.1 $21.0 $21.5 $22.6 $23.6 $25.3 $26.2 $27.7 $28.3 $29.6 $31.0 $32.2

$0 $5 $10 $15 $20 $25 $30 $35 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 ($ billions) Estimates

Page 2

• Republican Control for many years
• Executive branch and House and Senate
• Balanced Budget requirement
• General and oblique (constitutional)
• Appropriations cannot exceed revenues
• Revenue limit
• Last year’s revenues plus growth in personal income
• Statutory framework for fiscal management
• Revenue Estimating Conferences
• Projected variances require action if >1.5% of forecast
• Policy Limit for Debt
• Soft limit
• Debt Service can’t exceed 6% of revenues

Florida’s Profile

Page 3

• The primary tools used by the State to address the revenue

decline and resulting budget deficits included:

• Spending Cuts
• Appropriations decreased nearly $6 billion from FY 2007 to FY 2010
• Growth returned as recovery took hold -- FY 2019 total appropriations of

$89.3 billion are $21.4 billion more than FY 2010

• Use of Reserves
• State spent over $7 billion of its reserves from FY 2006 to FY 2009
• As revenues improved, State rebuilt reserves -- FY 2018 total reserves of

$5.1 billion vs. $2.8 billion in FY 2009

• American Recovery and Reinvestment Act (“ARRA”)
• $5.5 billion in additional Federal funding from FY 2009 through FY 2011

which helped supplement General Revenue and Trust Funds

• Raising Taxes
• Generated over $1 billion in additional recurring State revenues

Budget Balancing Exercise

Page 4

• The State also implemented Pension Reform & Pension

Holiday

• State implemented Pension Reform in 2011
• Required employees to contribute 3% of salary,

prospectively eliminated the Cost of Living Adjustment benefit, and extended vesting period

• State’s pension funding holiday from FY 2011-2013 created $2.1

billion in additional budget flexibility

• Substituted financing for PAYGO in certain instances
• Prisons 2009 financing ($450 million budget relief)
• Capital spending reductions, staff cuts, salary freeze
• State took action on specific bonding programs as needed
• Documentary Stamp Taxes, which back State environmental bonds,

decreased nearly 75% during the great recession ($4 billion in FY 2006 to $1 billion in FY 2010)

• State responded by expanding the pledged revenues from 63% of

Documentary Stamp Taxes to 100%

Additional Steps Taken

Page 5

• Political acrimony – intraparty squabbles
• Late Budgets – Illinois is poster child
• Pension Holidays – chronic vs. episodic
• Ballot Initiatives/Revenue Limits
• Credit Downgrades
• Deficit Spending
• Connecticut
• Recently embedded spending and borrowing limits in its

General Obligation debt

Anecdotal Observations of Other States

Page 6

• Management
• Demonstrated fiscal prudence
• Integrity of Institutional Processes
• 3-year Plan
• Revenue estimates
• Financial Discipline
• Structural Budget balance
• Timely Budget adoption
• Avoiding one-shots or budget gimmicks

What Matters