5 Ways Florida Lawmakers Can Raise Revenue Ahead of Projected Deficit

In 2016, Florida voters adopted a constitutional amendment that requires the Legislature and the Office of Economic and Demographic Research (EDR) to develop a Long-Range Financial Outlook (LRFO) that offers an overview of the state’s financial position for the next three fiscal years. The outlook combines projections of the major programs driving Florida’s annual budget requirements alongside revenue estimates. These projections reflect current spending decisions and tax policies. Overall, the LRFO is a tool that offers a baseline to help policymakers avoid future budget issues and maintain financial stability between fiscal years.

The 2024 outlook, which was adopted by the Legislative Budget Commission on Sept. 6, 2024, estimates a $2.1 billion budget surplus in the upcoming fiscal year, FY 2024-25, and — without intervention — a $2.8 billion deficit in FY 2026-27 and $6.94 billion deficit in FY 2027-28.

Throughout the past three fiscal years, federal COVID-19 policies have helped to increase Florida’s reserves, buoy public services (including unemployment insurance, health care, child care, and public education), and directly support Floridians. However, the unique conditions that boosted Florida’s trust funds, sales tax collections, and, by extension, historic reserves, are unlikely to repeat. The newly-adopted outlook corroborates this reality and highlights the need to make new budget and tax policy choices.

The 2024 outlook, which was adopted by the Legislative Budget Commission on Sept. 6, 2024, estimates a $2.1 billion budget surplus in the upcoming fiscal year, FY 2024-25, and — without intervention — a $2.8 billion deficit in FY 2026-27 and $6.94 billion deficit in FY 2027-28.

Following the Great Recession (beginning with the last quarter of 2007 and ending the third quarter of 2009), policymakers turned to budget cuts to balance the budget. Austerity measures ultimately led to stagnant funding for programs, leaving many Floridians without the public services necessary to thrive. Today, on a per capita basis, Florida’s state and local governments spend less than 44 other states and D.C. on public services. As such, to address the projected deficits outlined in the 2024 outlook, policymakers must consider new options that do not involve austerity measures like those made in the past. By focusing on increasing revenue instead of making budget cuts, policymakers can ensure that the state has the tools to address ongoing and future challenges.

Below, Florida Policy Institute outlines five ways that the Legislature could raise revenue without turning to budget cuts.

1. Expand Medicaid to all adults with income below 138 percent of the poverty level.

‍Florida is one of ten states that has not adopted Medicaid expansion. If lawmakers expanded Medicaid, it would not only provide access to health coverage for over 799,000 uninsured Floridians — it would also result in Florida receiving an enhanced federal match, enabling the state to save $200 million annually in savings. The state would also be able to access a two-year "bonus” match — estimated at $2.9 billion — from the American Rescue Plan Act.

2. Close out-of-state corporate tax loopholes by requiring combined reporting.

‍Currently, large multi-state corporations can avoid paying Florida’s Corporate Income Tax (CIT) by shifting profits off to other entities in tax havens. Florida should follow the lead of 28 states and the District of Columbia and require these corporations to add together profits of all subsidiaries, regardless of their location, into one combined report. Some states with tax structures like Florida’s (i.e., those without personal income taxes but with corporate income taxes) — Alaska, New Hampshire, and Texas — already require combined reporting. Enacting combined reporting would raise $400 million to $800 million annually.

3. Reject new sales tax holidays.

‍Since policymakers are required to pass a balanced budget each fiscal year, revenue lost through sales tax holidays must be made up elsewhere, either through spending cuts or by increasing other taxes. Although sales tax holidays are meant to offer taxpayers an opportunity to offset their general sales tax bill, they are not a long-term solution. By not enacting new sales tax holidays, Florida could raise $82 million per holiday week.

4. Reinstate income eligibility limits for private school vouchers.

‍In FY 2024-25, Family Empowerment Scholarship (FES) vouchers for private schools already account for 18 percent of the total Florida Education Finance Program with an estimated cost of $2.8 billion. This is in addition to the $1.1 billion approved for the Florida Tax Credit Scholarships for vouchers and $250 million required to help school districts and charters cope with fluctuations in enrollment due to state vouchers. These funds go largely to families who were already paying to send their children to private schools or to homeschool them. The vast majority of private schools in Florida are unaccredited and their academic outcomes cannot be directly compared to public school outcomes. There is little accountability for these funds and an unknown return on a significant investment of public tax dollars. Lawmakers should prioritize reinstating income eligibility limits to Florida’s voucher system so that the wealthiest Floridians do not receive private school tuition subsidies.

5. Bring tax expenditures under scrutiny to assess their impact and eliminate costly tax privileges.

‍While spending through the state budget takes the form of collecting revenue and appropriating these dollars to be expended, spending through the tax code takes the form of revenue the state forfeits. In FY 2024-25, spending through the tax code will cost an estimated $25.7 billion in forgone revenue. Unlike budget appropriations, silent spending is rarely reevaluated once codified into law. To raise revenue, policymakers ought to: (i) evaluate the effectiveness, efficiency, and equity of current tax expenditures; and (ii) eliminate those that no longer serve the public interest.