How Florida’s Record-Setting Budget Could Set The Stage For Sports Betting

Written By Steve Schult on March 25, 2022
Florida Budget

Last week, legislators in the Sunshine State passed the largest budget in state history. The Florida budget proposed by lawmakers totals $112 billion, which is roughly 10% larger than the current one.

The plan heads to Gov. Ron DeSantis’ desk and will be implemented in the 2022-2023 fiscal year. DeSantis has line-item veto power, however, which gives him the power to pick-and-choose specific portions of it to cut.

At this point, I know what you’re thinking. How does this affect the passage of legal Florida sports betting?

Outside of Nevada, which basically built its state around the legalized gambling industry, most states that look into gambling legalization or expanding their current market do so for one of two reasons.

Both have to do with taxes.

  • The state is staring at a budget deficit and needs to find a new source of tax revenue to fund its spending.
  • The state shares borders with other states that have it and citizens are crossing borders to spend money in other jurisdictions.

In the latter example, it’s a bit of a domino effect. But tax policy is still at the center of the argument.

Politicians watch citizens cross state lines, spend their money in other jurisdictions and watch those governments reap the taxes.

In response, even politicians that were anti-gambling begin to advocate for legalization. They tend to justify their policy switch by saying something by claiming the tax revenue can be used to fund programs in their own state.

However, most of Florida’s borders are with bodies of water. Furthermore, neither Georgia nor Alabama have many gambling options. In Georgia’s case, it’s just a lottery.

Then they must really need the tax revenue. Well, they are currently operating with a surplus. OK, let’s dig a little deeper.

The Florida budget is funded partly from sources that won’t last forever

In early January, when the legislators were drawing up the Florida budget, state economists projected an additional $4 billion coming to the state coffers.

Where is that money coming from?

For the last few years, Florida’s real estate market skyrocketed. Yes, the entire country has watched housing prices rise. But thanks in part to an influx of migration to the state, Florida’s housing market rose more than other states.

Rising home prices lead to more revenue from property taxes, as well as from the transaction itself.

But is the housing market in a bubble? How long can these prices be sustained before a correction takes place? Especially if mortgage rates move upward again.

In addition to the real estate boom, Florida is receiving coronavirus relief payments from the federal government.

I’m an expert on gambling. Not the real estate market. But from my own research, it seems like experts are divided as to whether housing prices will correct.

But one thing is certain. Those federal payments will certainly end. When they do, that will be revenue that needs to be made up somewhere.

And even if there isn’t a full-on housing crash, a correction of any size would lower revenue to some degree. I don’t want to repeat myself, but I will. The lost revenue would need to be made up somehow.

How likely is it that DeSantis implements the proposed Florida budget?

Most of the proposed spending agenda is very popular among both sides of the political aisle.

Among the additional spending includes $800 million to increase teacher salaries, a 5.38% pay increase for government employees and $1.4 billion for state colleges and universities. Even a fiscal conservative like DeSantis would have a hard time saying ‘no’ to those ideas.

It’s safe to assume that DeSantis will cut something. But unlikely that he’ll completely gut what’s heading his way. As a result, there will almost certainly be a spending increase of some sort by the state government.

By this point, I think you see where I’m going with this.

Increased spending + decline in revenue = a push for new revenue sources

Lawmakers rarely cut budgets on a year-over-year basis. Even in states run by Republicans, who typically champion fiscal responsibility. Once the spending is in place already, it’s usually there for good.

Additionally, state governments don’t have the same type of economic flexibility that the federal government does. The feds can sell treasury securities to the Federal Reserve to continue operating. Florida’s state government doesn’t have that option.

This creates a crossroads for Florida at some point in the future. The state is staring at increased spending and revenue sources that could easily dry out. This creates a need for new streams of income for the state.

I’ll admit that it might not be the most expedient way for gambling expansion to take place.

After all, the housing market doesn’t have the drastic swings that we see in other industries. It’s basically impossible for housing prices to drop like the stock market temporarily did two years ago.

Though at some point, the proverbial chickens will come home to roost and the government will need more tax dollars.

And in this current climate, there are only a couple of things both sides of the political spectrum can agree on. Luckily for gamblers, both major parties believe expanded gaming options are a politically safe way to raise revenue for the government.

Current Florida sports betting tax revenue projections

On the bright side, expanded gambling and legal sports betting look like a question of when and not if.

DeSantis and the Seminole Tribe agreed to terms on a new, 30-year gaming compact last year that would’ve allowed the tribe to be the focal point of the state’s sports betting market.

That compact is currently amid what will be a long legal battle. According to estimates, the compact would net the state $20 billion over the course of the deal. On an average per year basis, that comes out to about $666 million in added annual tax revenue

Even if the compact fails, there are attempts by other out-of-state operators to bring a free-market approach to the potential industry.

FanDuel and DraftKings spent more than $32 million last year to fund a political action committee tasked with signature-gathering for a sports betting ballot initiative. According to a study released by the PAC, allowing out-of-state companies to participate would result in $264 million in annual tax revenue.

The PAC was unsuccessful in getting the issue in front of voters in 2022.

It’s still unclear which direction Florida’s market will go, but whichever road it chooses will certainly help whatever revenue issues it faces.

Steve Schult Avatar
Written by
Steve Schult

As Managing Editor of PlayFL, Steve will stay on top of all things related to the Florida gaming industry. He is also a veteran of the gambling world. The native New Yorker started covering high-stakes tournaments in 2009 for some of poker's most prominent media outlets before adding the broader U.S. gaming market to his beat in 2018.

View all posts by Steve Schult