Federal CARES Act Money Won't Cover Florida's Revenue Shortfalls, Non-Profit Think Tank Warns

Apr 29, 2020
Originally published on April 28, 2020 6:18 pm

Non-profit think-tank the Florida Policy Institute, which describes itself as non-partisan, is warning state leadership that money earmarked for Florida through the federal CARES act won’t cover state budgetary shortfalls.

A massive spike in unemployment will lead to depressed sales tax revenue, and the Institute’s analysts claim COVID-19 will cause disruption worse than that of the Great Recession. Out of a $150 billion federal coronavirus relief fund for states and local governments, $4.6 billion is going to Florida.

Although, none of that money can go toward supplementing revenue losses for the state, says the Policy Institute’s CEO Sadaf Knight.

It included some stipulations on which expenses would be allowable under the coronavirus Relief Fund, or CRF, and it did not include spending to directly address revenue shortfalls,” Knight said on a media call held by the Institute Tuesday.  This was confirmed last week in additional guidance that was published from the U.S. Department of Treasury, which states that CRF funds cannot be used to backfill revenue losses and shore up state budgets.”

Knight says allowable expenditures have to be directly related to helping address the public health crisis that is COVID-19. For that reason, Knight thinks states will need additional federal funding specifically for stabilizing their budgets, and Florida is no exception.

Senate President Bill Galvano published a memo last week saying the vast majority of Florida’s $4.6 billion from the CARES act has been deposited into the state treasury.

Galvano wrote, “we expect that the federal government will offer clarification that these funds can also be used to offset revenue losses” for the upcoming fiscal year. Galvano also said that clarification would “reduce the possibility” the legislature would need to return to Tallahassee for a special session – something Governor Ron DeSantis has previously said he hopes lawmakers don’t have to do. 

Yet, Knight says Galvano’s expectation that additional “clarification” is coming is “contrary to the guidance released from (the U.S.) Treasury.” She says “investments made in the last budget” like pay raises for teachers, should be “preserved,” fearing they could become a casualty of cuts related to revenue loss.

“Unless there is more state fiscal relief (from the federal government) that is both flexible and targeted to addressing revenue shortfalls, all of these investments will be on the line and states will be facing devastating cuts to programs across the board,” Knight told reporters.   

DeSantis has yet to take action on the budget for the coming fiscal year, and said earlier this month that he's likely to have an active veto pen, even on items he supports. 

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