Is Florida in Debt? A Look at State and Local Finances

Debt represents a financial obligation, much like a loan, that a government incurs to finance various public needs. States often borrow funds to invest in long-term projects and services that benefit their residents. This borrowing allows for significant undertakings, such as infrastructure and educational facilities, that would be difficult to finance solely through annual tax revenues.

Florida’s State Level Debt

The central government of Florida issues debt primarily to fund large-scale infrastructure projects and specific state programs. These initiatives often include the construction and maintenance of transportation networks like roads and bridges, as well as the development of state buildings and educational institutions.

As of June 30, 2024, Florida’s total direct debt outstanding was approximately $15.4 billion, reflecting a reduction from the previous fiscal year. This figure includes debt for transportation, which accounts for about 51% of the total, and educational facilities, representing roughly 38%. The state has shown a consistent trend of decreasing its outstanding direct debt over the past decade, demonstrating a cautious approach to borrowing.

Local Government Debt in Florida

Debt in Florida is not confined to the state level; local government entities also hold substantial financial obligations. These entities include counties, cities, school districts, and various special districts such as water management authorities or port authorities.

Local governments commonly issue debt to fund local infrastructure, construct and maintain schools, and provide public services. For instance, a county might borrow for new roads, while a city could finance a water treatment plant. Local government debt often represents a significant portion of the overall debt associated with the state, sometimes being several times higher than the state’s direct debt.

Understanding Debt Instruments

Governments in Florida, both at the state and local levels, primarily utilize two types of debt instruments: General Obligation (GO) Bonds and Revenue Bonds. These bonds differ in their security and repayment mechanisms, influencing their risk profiles and investor appeal.

General Obligation Bonds

General Obligation Bonds are secured by the full faith and credit of the issuing government. This means the government pledges all its available resources, including its taxing power, to repay bondholders. For local governments, this often involves a pledge to levy property taxes to meet debt service requirements. GO bonds are typically used for projects that do not generate a direct revenue stream, such as schools or general public infrastructure.

Revenue Bonds

Revenue Bonds are repaid solely from the income generated by the specific project they finance. Examples include tolls from a bridge, fees from a utility system, or revenues from an airport. Unlike GO bonds, revenue bonds do not rely on the general taxing authority of the issuer for repayment.

Key Indicators of Fiscal Health

Several financial metrics assess Florida’s state and local governments’ ability to manage debt. Credit ratings are a prominent example, provided by agencies such as S&P, Moody’s, and Fitch. These agencies evaluate creditworthiness and assign ratings; Florida consistently earns AAA general obligation credit ratings with stable outlooks, reflecting its economic strength and prudent financial management.

Debt per capita, which calculates total debt divided by the population, is another indicator. Florida’s per capita debt balance was around $62,000 recently, and its state-level per capita debt is among the lowest nationally.

The debt service burden, or benchmark debt ratio, measures the percentage of total expenditures or revenues dedicated to paying off debt. Florida’s legislative policy guidelines establish a 6% target and a 7% limit for this ratio, which stood at 2.93% in FY 2023, consistently below target. Other ratios, such as debt to state personal income and debt to gross domestic product (GDP), also provide insights into the state’s fiscal strength.

Debt Management Framework

Florida employs a structured framework to manage its debt, guided by specific constitutional and statutory provisions. Florida Statutes Section 215.98, for instance, outlines requirements for debt affordability analysis and sets policy guidelines for the state’s benchmark debt ratio. These provisions ensure that debt issuance remains within prudent limits.

Key entities involved in overseeing and managing the state’s debt include the Governor’s Office, the Legislature, and the State Board of Administration, specifically its Division of Bond Finance. The Division of Bond Finance plays a central role in implementing the state’s debt management policy, which provides guidance on the amount and purposes for which debt may be issued, as well as structural features and compliance with legal requirements. This framework aims to facilitate access to capital markets at favorable borrowing costs and maintain financial stability.