Slowdown warnings don’t faze lawmakers

Leaders say economic numbers support their decisions to put more money in reserves, pay down debt, keep taxes low

TALLAHASSEE – A top state economist warned lawmakers Thursday the state could face an economic slowdown next year, even as it becomes more reliant on tourism and faces a possible budget shortfall in coming years.

But legislative leaders weren’t concerned, saying the numbers backed up their decisions to put more money in reserves, pay down debt and keep taxes low.

They said they will continue that strategy as they head into 2020.

Chief economist Amy Baker outlined the state’s three-year fiscal outlook to the Joint Legislative Budget Commission and highlighted estimates that show an economic slowdown – although not a recession – in 2020.

A state budget surplus of $289.3 million is projected for the 2020-2021 fiscal year.

But a slowdown, combined with anticipated increases in spending for education, health care and criminal justice spurred by population growth, along with higher health care costs and higher drug costs, will result in shortfalls of $486 million and $365.7 million in the following two years.

Senate budget chief Rob Bradley wasn’t alarmed.

He cited job and wage growth, as well as population growth that is projected to continue in future years.

“I look at the data that I heard today and feel good about where we are and where we’re going,” Bradley said.

But he added that the possibility of an economic slowdown could make any huge spending increases unlikely.

“There are signs from some economists that the economy may slow down a little bit in the upcoming years,” Bradley said. “In order to prepare for that, we don’t need to be adding a bunch of new spending. We need to stick to the basics and focus on our critical needs.”

Bradley didn’t rule out a teacher pay raise, which Gov. Ron DeSantis could include as part of his budget recommendations for next year, but suggested some retooling of the Best and Brightest bonus program could be more likely.

The projected shortfalls aren’t sending lawmakers rushing to the negotiating table with the Seminole Tribe, either. The Seminoles stopped paying the state in April as part of a gaming compact giving it exclusive rights over banked card games like blackjack.

Some lawmakers have wanted to renegotiate a compact, which was projected to bring in about $350 million a year.

But Bradley said that while he’d like to cut a deal that makes sense, even an economic slowdown that pinches Florida’s pocketbook won’t make them more desperate for revenue.

“We’d just as soon not have a deal if it’s a bad deal,” Bradley said. “We do not need tribal revenue in order to operate the state government.”

Current economic data show the tourism industry is outperforming expectations, with 128.5 million visitors in the fiscal year that ended June 30, a 5.8 percent increase over the previous year.

That’s making up for slower construction numbers, particularly in residential.

But that also means Florida is becoming even more reliant on tourism for economic growth and revenues, an industry susceptible to economic downturns.

Baker noted that a recent analysis by state economists showed 13.4 percent of the state’s sales tax revenues could be attributed to the tourism industry, the highest percentage in the three years they’ve done the study.

“Since we are relying on tourism to continue outperforming and continue being an outsized part of our forecast, then that means that puts it as an area of risk for us,” Baker said. “It is very vulnerable to any natural or man-made events that are going on.”

One of those “manmade” events could be heightened tensions over tariffs, the report states, especially on Chinese goods. The Trump administration plans to increase tariffs on imports even as it looks to negotiate with the Chinese government on trade concessions.

Bradley