Analysts generally see Florida Gov. Ron DeSantis' recently proposed fiscal 2025-2026 budget as fiscally responsible, with steps to pay down the debt, reduce overall spending, and strengthen requirements for issuing new debt.
The proposed budget comes in the aftermath of a September report by the
While the deficit was not anticipated to start until fiscal 2026-2027, DeSantis probably saw the current budget as a step to addressing the projections, said Dominic Calabro, Florida Tax Watch president and CEO. "We take action before action is often desperately needed," Calabro said.
The proposed budget is "a very good start," Calabro said. "It's a fiscally responsible budget."
DeSantis calls his budget a "Focus on Fiscal Responsibility Budget," and says that his proposed all-government activities budget of $115.6 billion is more than $3 billion lower than the current fiscal year budget. His proposed general revenue budget of $50.2 billion is a $383.4 million increase from this fiscal year's general revenue budget.
The overall budget's shrinkage may be due to diminishments in gas tax revenue, fees, trust fund revenue and federal support, Calabro said.
The governor's proposed budget is balanced, as required by Florida's constitution, and includes total reserves of $14.6 billion, consisting of $4.2 billion of unallocated general revenue, $4.9 billion in the budget stabilization fund, $2.3 billion in unallocated trust funds, $1 billion in the emergency preparedness and response fund and $2.2 billion in reinsurance assistance and the Florida optional reinsurance assistance programs.
"Florida's fiscal position remains strong," Fitch Ratings Director Tammy Gamerman told The Bond Buyer. "While the state faces long-term spending pressure due to rising education and health care costs, the state continues to build up reserves
Florida's general obligation debt is rated triple-A by Moody's Ratings, S&P Global Ratings, and Fitch.
The governor's proposed budget includes a $567 million turnpike revenue bond with a 30-year final maturity, a $449 million right-of-way acquisition and bridge construction bond with a 30-year final maturity, a $204 million grant anticipation revenue vehicle bond with an 18-year final maturity, a $79 million transportation financing corporation bond with a 20-year final maturity and an $89 million Department of Transportation construction bond with a 30 year final maturity. While all would be sold from July 1, 2025, to June 30, 2026, additional information about their timing was not available.
Florida Senate President Ben Albritton and House of Representatives Speaker Daniel Perez, both Republicans, will work on the budget and likely make some changes over the next few months, Calabro said. The government must enact a budget before July 1.
Muni Credit News Publisher Joseph Krist emphasized the legislature's role this year.
"While every budget is political, this one is more so given DeSantis' political position," said Krist. Given his recent struggles with the legislative leadership, "now we know that the governor has lost his ability to steamroll the legislature."
Krist was more negative on the budget than the other analysts. "The budget is full of tax cuts which is no surprise," he said. "There doesn't seem to be the will to take a longer-term approach to the state's finances." The projections of the Office of Economic and Demographic Research "aren't driving any real reactions," Krist added.
Legislative leaders on Tuesday reached a compromise with DeSantis on the state's residents who entered the country illegally after two weeks of feuding with him. Given this history, "my sense is that it would be a surprise if future budget gaps are addressed until the 2026 election is done," said Krist. There are still many potential gubernatorial candidates testing the waters for the 2026 election, "so it's not a time to do anything politically risky."
To support the budget's claimed fiscal responsibility, DeSantis is proposing a bill to lower the allowed ratio of debt service to revenue for legislature-authorized debt. If passed, the normal ceiling would go to 4% from 6%. If the legislature wanted to exceed the 4% ratio but remain below 5%, the legislature would have to declare the additional debt would be in the best interest of the state. If the legislature wanted to issue debt that would push the ratio above 5%, formerly 7%, the legislature would have to declare the debt necessary for a state emergency.
The new bill "doesn't hurt but I don't see it as a major credit factor," Krist said.
DeSantis has set a goal of paying down 50% of the state's tax-supported debt by fiscal year 2027-2028. By the end of fiscal 2025-2026 the state will have paid down 48.75% of this debt. The governor's budget includes The governor's budget includes $600 million to pay various bonds off early and $230 million to pay off all
"It would be the third year and largest appropriation to pay down debt, an intentional policy decision to reduce the state's long term fixed costs," said Ben Watkins, Director of Florida Division of Bond Finance."
The governor's proposed budget includes no across-the-board pay increases for government employees. This is the first time since early in his term that DeSantis has proposed this. His budget includes substantial pay increases for state law enforcement officers and firefighters.
DeSantis' budget reduces the business rent tax to 1% from 2% on Jan. 1, 2026, and the governor says he plans to lower it to 0% on Jan. 1, 2027. Calabro said the elimination of this tax has been a goal of Florida Tax Watch. Florida is the only state with this sort of tax. The tax hurts small and medium sized businesses even more than large ones, Calabro said.
"Florida's small businesses applaud Gov. DeSantis' proposed budget and its focus on fiscal responsibility," said Bill Herrle, National Federation of Independent Business Florida executive director. "Repealing the state's business rent tax will provide small businesses with much-appreciated tax relief and allow small employers to further invest in their businesses and employees."
The budget proposes a full-time equivalent payroll of 113,026, a decrease of 741 FTE positions from the current fiscal year. DeSantis' budget would make the biggest cuts in the health (484), justice (66) and transportation agencies (56).
Eric Kim, head of U.S. State Ratings, told The Bond Buyer that Fitch is keeping an eye on the possible impact of federal Medicaid funding on state governments. If the Trump administration were to execute a big shift on this, it would have a meaningful impact on states.
Additionally, Fitch is keeping watch on
