Florida’s Budget Structure and Process

1. Florida’s Budget Structure and Process July 20, 2007

2. Budget Powers in the Florida Constitution The Legislature: The budget is product of the Legislature. Florida's Constitution gives the Legislature the exclusive power to appropriate state funds (Article VII, Section 1.(c)). The Governor: The Constitution designates the Governor as the “... chief administrative officer of the state responsible for the planning and budgeting of the state.” (Article IV, Section 1.(a)). The Chief Financial Officer: The chief financial officer shall serve as the “chief fiscal officer of the state and shall settle and approve accounts against the state, and shall keep all state funds and securities.” (Article IV, Section 4(c)). Constitution Requires Balanced Budget:“Provision shall be made by law for raising sufficient revenue to defray the expenses of the state for each fiscal period.” (Article 7, Section 1(d)) See section 216.221 (1), Florida Statutes.

3. Consensus Estimating Conference • Major Projections Developed By Conferences • amount of General Revenue available for appropriations • amount of Lottery funds available for appropriations • number of children to be enrolled in public schools • number and caseload for Temporary Assistance to Needy Families • amount of Public Education Capital Outlay (PECO) funds • number of prisoners • caseload and expenditures for Medicaid Develop agreed-upon projections for certain revenues and caseload/ workload data Senate House Governor Economic & Demographic Research

4. Fund Segregation • General Revenue - Consists of all monies received by the state not earmarked by law for a specific purpose. The balance of funds in the General Revenue Fund which is in excess of the amount needed to meet General Revenue Fund appropriations for the current fiscal year is known as the “working capital balance”. • Trust Funds - Consist of moneys received by the state which under law or under trust agreement are segregated for a purpose authorized by law. • Budget Stabilization Fund - Consists of monies set aside equaling five percent of the General Revenue Fund. It is required by the Constitution and can only be used to cover General Revenue shortfalls and emergencies. The current balance is approximately $1.2 billion.

5. Budget Stabilization Fund Requirements Source: Budget Stabilization Fund estimates are based on the March, 2007 Revenue Estimating Conference projections.

6. State tax revenues available for any use These are the revenues that programs compete for and the Legislature must allocate between programs Primary Funding Sources TRUST FUNDS GENERAL REVENUE Both have revenues that are recurring and non-recurring • Monies that are earmarked by law for specific purposes • Legislature has little discretion in allocating among programs, unless the law is changed

7. Budget Workshops Agency Legislative Budget Request • By October 15, Agencies provide the Legislature and Governor with a Legislative Budget Request (LBR), reflecting each agency head’s independent assessment of needs. • As early as October, the Senate and House Appropriations Committees begin developing their respective budget proposals. • Committees hold hearings and workshops in which agencies and advocates request funding. Agency Legislative Budget Request SENATE HOUSE GOV

8. Budget Workshops Governor’s Recommended Budget • 30 days prior to the Legislative Session, the Governor submits his recommended budget. • The Governor’s budget must be balanced within available revenues or must include recommendations to increase revenues to sufficiently fund his budget recommendations. Agency Legislative Budget Request SENATE HOUSE GOV Governor’s Recommended Budget

9. Budget Workshops House and Senate Budget Proposals • Early in the Legislative Session, the Appropriations committees are given the policy guidelines and a funding allocation. • The committees proceed to develop a budget proposal which funds specific programs that fall within those guidelines and allocations. • Next, the proposed appropriations acts are considered by both the Senate and House. • Since the Senate and House Appropriations bills are never identical, nor is there usually full agreement on the policy underlying their development, a Conference Committee is appointed to hammer out a compromise appropriations bill. Agency Legislative Budget Request SENATE HOUSE GOV Governor’s Recommended Budget Proposed Senate Bills Proposed House Bills Senate Bill House Bill

10. SENATE HOUSE GOV The Conference Report Agency Legislative Budget Request • The Conference Committee consists of Senate members appointed by the President and House members appointed by the Speaker. • The compromise appropriations bill is known as the Conference Report. • The Report may not be amended by the membership of the Senate or House, only accepted or rejected. • The Constitution requires a 72-hour waiting period between distribution of a General Appropriations Bill Conference Report and its final passage. Budget Workshops Governor’s Recommended Budget Proposed Senate Bills Proposed House Bills Senate Bill House Bill Conference Report

11. Budget Instructions & Guidelines (July 15) Gov’s Budget Office House Agency Request (October 15) Senate Governor House Senate Governor’s Recommended Budget (30 days prior to Session) Committee Hearings (Budget Workshop) October-February Committee Hearings (Budget Workshop) October-February Proposed House Bills (4th Week of Session) Proposed Senate Bill (4th week of Session) House Bills (5th week of Session) Senate Bill (5th week of Session) Conference Report Operating Budget

12. Key Budget Allocation Decisions • Budget reductions • Measures affecting revenues • Amount of non-recurring revenues to be spent on recurring programs • “Must funds” and specific program enhancement priorities • Working capital balance • Separate allocations developed for House/Senate bills and Conference

13. Recent Budget Changes to the Constitution

14. Long Range Financial Outlook • Article III, Section 19(c)(1) provides: “No later than September 15 of each year, the joint legislative budget commission shall issue a long range financial outlook setting out recommended fiscal strategies for the state and its departments and agencies in order to assist the legislature in making decisions.” • Statute provides that the outlook shall be an annually updated 3 year plan

15. Outlook Assumptions • Revenue estimates reflect latest official Revenue Estimating Conference projections • Expenditure estimates also reflect official Estimating Conference projections, where applicable, such as Prisons, Medicaid, and public school enrollment • Historical spending averages are used for other key budget drivers, such as economic development and environmental projects

16. Outlook Summary • The comparison of projected revenues to expenditures is summarized to display the anticipated balance forward or deficit • Summaries are provided for recurring and non-recurring General Revenue and the major trust funds such as Educational Enhancement (Lottery) and Tobacco Settlement Trust Fund • Strategies are developed to address any negative balances

17. Limits use of Non-recurring Funds for Recurring Purposes • Article III, section 19 (a)(2) provides: “Unless approved by a three-fifths vote of the membership of each house, appropriations made for recurring purposes from nonrecurring general revenue funds for any fiscal year shall not exceed three percent of the total general revenue funds estimated to be available at the time such appropriation is made.”

18. Current Budget Update • FY 2006-07 actual revenues below March 2007 official estimates by over $400 million • August 1 General Revenue estimating conference • Potential recurring revenue shortfall for FY 2007-08 of over $800 million • Although an actual cash deficit is not projected due to reserve balances, budget reductions are being considered to align recurring appropriations with new revenues • Joint letter sent to agencies requesting proposed reductions by August 8 • Discussing special session to reduce agency budgets possibly in September