Florida’s Tax Revenues Projected To Take $3.4B Hit
Florida’s revenue picture this year took a $3.42 billion hit Friday as state economists evaluated the damage caused by the coronavirus pandemic.
The economists lowered an estimate of general revenue for this fiscal year by $3.42 billion and an estimate for the 2021-2022 fiscal year by nearly $2 billion. General revenue, which includes such money as sales taxes and corporate income taxes, play a vital role in funding schools, health care and prisons.
Tax revenues began plummeting in April after businesses shut down or dramatically scaled back because of the pandemic. The drop in revenues has led to widespread speculation about whether lawmakers will have to return to Tallahassee to cut a budget that took effect July 1.
But Republican leaders maintain that expanded budget reserves approved during this year’s legislative session, along with cash-conserving vetoes by Gov. Ron DeSantis, will prevent the need for a special session before the November elections.
Friday’s revised estimates will be used in putting together what is known as the state’s Long Range Financial Outlook, which helps guide budget decisions. The Joint Legislative Budget Commission, made up of House and Senate members, will consider the outlook next month.
“This important document (the outlook) will provide a more holistic view of economic and budgetary factors over the next three years and will serve as an important tool for the Legislature when it reorganizes following the November election,” Senate President Bill Galvano, R-Bradenton, said in a memo to senators Friday. “As has been the case since early March, the situation continues to change on a near-daily basis. For today, I view the updated estimate as a critical step in understanding our future, and I continue to remain optimistic about the ultimate recovery of Floridians’ personal and economic health.”
The economists, who meet as the state Revenue Estimating Conference, added a footnote to the forecast saying the financial picture could improve if the state gets to expand its use of federal CARES Act dollars to fill revenue shortfalls. However, any potential expanded use of the stimulus money or additional federal stimulus dollars must wait until Congress returns in September.
“What we're trying to say here is we've got a lot of uncertainty about how the federal money can be used,” said Don Langston, staff director of the House Finance & Tax Committee and a member of the Revenue Estimating Conference.
The state received $8.238 billion through the CARES Act, of which $2.472 billion went to local governments. Most of the remaining money has also been allocated.
The reduced revenue forecast for this fiscal year and the 2021-2022 fiscal year came after the state’s net general revenue came in at $31.366 billion for the fiscal year that ended June 30. That was $1.88 billion below an earlier forecast, as tax dollars dropped in April, May and June.
Before the revised numbers were finalized Friday, DeSantis said he’d seen revenue forecasts coming in better than previously thought. But he added more “tough decisions” remain regarding state spending.
“I think we're going to be able to get through this budget year without doing a special session,” DeSantis said Friday while at an appearance about mental-health issues in Sarasota. “Certainly, we'll be able to get to the end of the calendar year without having to do any type of special session.”
Democrats have clamored for lawmakers to return to Tallahassee to address the economic hits to the state from the pandemic.
DeSantis, who vetoed $1 billion from the state budget for the current fiscal year, continues to anticipate federal dollars will help patch financial holes.
DeSantis added an improved outlook will depend on the overall health of the national economy, the state’s unemployment situation that currently reflects more than 1 million Floridians out of work and improvements to the struggling hospitality industry.
“I hope we can continue to put people to work because that will really help us maintain a stable fiscal outlook,” DeSantis said.
Economists foresee an increase in spending once people eventually get out again and start opening their wallets.
Amy Baker, head of the Legislature’s Office of Economic and Demographic Research, anticipates the unleashing of a large reservoir of money that went into savings as people hunkered down against the pandemic.
“There is a large chunk of money right now that's in savings accounts, that when it comes back in, as it comes back in, it's going to have an effect on the economy that is upward and cannot be explained by personal income and wages and salaries,” Baker said. “It's money that was locked out of the economy that will be released back into the economy.”
Baker acknowledged the uniqueness of the pandemic isn’t similar to other disasters and recessions experienced by the state, adding to the difficulty of economic modeling.
“Certainly, we know the last quarter of last year is not in our economic forecast, (it’s not) going to be replicated exactly the same way again,” Baker said.