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Florida's Budget Outlook Shows Slight Improvement

Sen. Wilton Simpson, R-Spring Hill, who will serve as Senate president from 2020-22, speaks during session at the Capitol on Thursday, March 19, 2020 in Tallahassee, Fla. (AP Photo/Aileen Perilla)
Sen. Wilton Simpson, R-Spring Hill, who will serve as Senate president from 2020-22, speaks during session at the Capitol on Thursday, March 19, 2020 in Tallahassee, Fla. (AP Photo/Aileen Perilla)

While they didn’t go as far as the governor’s office wanted, Florida economists Monday shrank a projected revenue reduction lawmakers will confront when they hammer out the next budget.

The economists, who met as the Revenue Estimating Conference, pointed to gains being made by businesses during the COVID-19 pandemic, outside of the vitally important tourism industry. They added back $1.5 billion to a general revenue projection for the current fiscal year and $623 million for the 2021-2022 fiscal year.

Still, Senate President Wilton Simpson, who warned during a Nov. 17 legislative organization session that budget cuts will be necessary in the upcoming year, cautioned Monday about viewing the numbers too positively.

“By any measure, the significant gains reflected in today’s estimate do not negate the many difficult challenges we will face as we craft a budget for the upcoming fiscal year, or that families and businesses across our state are facing as we all continue to battle COVID-19,” Simpson, R-Trilby, said in a prepared statement. “We know all too well that these estimates can change in a heartbeat; therefore, the Senate will continue to proceed with caution.”

In August, as the state was still in the second phase of Gov. Ron DeSantis’ coronavirus recovery effort, the economists reduced overall estimates of general revenue for this fiscal year by $3.42 billion and for next year by nearly $2 billion. The updated projections Monday trimmed those estimated reductions by a combined amount of about $2.1 billion.

General revenue, which includes such money as sales taxes and corporate income taxes, plays a vital role in funding schools, health care and prisons.

The Revenue Estimating Conference meets periodically throughout the year to update the projections, with the numbers serving as a baseline when lawmakers negotiate a budget. But the panel has faced an additional challenge this year because economic damage caused by the pandemic has slowed state tax dollars.

As lawmakers prepare to grapple with the budget during the 2021 legislative session, Simpson has raised the possibility of increasing college and university tuition to help hold the line on other programs. He also has suggested increasing revenue by reaching an elusive gambling deal with the Seminole Tribe of Florida and requiring the collection of sales taxes on all online purchases.

Amy Baker, head of the Legislature’s Office of Economic & Demographic Research, said Monday the economic recovery will become more apparent in the 2021-2022 fiscal year, when COVID-19 vaccines are expected to be widely deployed. The 2021-2022 year will start in July.

However, Baker said the state’s tourism industry is expected to remain down for much of next fiscal year.

“Even though a significant part of this category relates to the number of out-of-state tourists, this category also includes sales to Florida residents at restaurants, local attractions, and other leisure-based activities, which have also been negatively affected by the pandemic,” Baker noted. “The year-to-date gain in this category relates to restaurant sales, which are particularly sensitive to individual social distancing decisions, as consumers face a resurgence in the pandemic.”

The economists met for most of the day Friday but were unable to reach a compromise on final numbers, requiring additional time Monday morning to complete the work. DeSantis’ office pushed more optimistic numbers than what were proposed by staff at the Office of Economic and Demographic Research.

Holger Ciupalo, policy coordinator for the governor’s Office of Policy and Budget, drew a mild rebuke from Baker on Monday, as he was asked to be “a little more respectful of our analysts” after he described projections from the Office of Economic & Demographic Research about corporate-tax figures as “irrational.”

Ciupalo later remarked that “all the numbers are wrong.”

Revenue projections proposed before the conference by the governor’s office were overall about $1.66 billion higher than what came in from the Office of Economic & Demographic Research.

Baker noted that gains projected for corporate income taxes rely on year-to-date gains already made by businesses, “despite reduced profitability, business failures and delayed business formations exerting downward pressure on receipts.”

The new forecast includes improved employment projections from the August forecast, which could result in increased spending and additional state revenue next summer.

Countering some of the gains, businesses such as hardware stores, home-decorating, light-machinery and bicycle shops aren’t expected to continue extraordinary growth experienced through the pandemic. The same goes for upticks in sales of furniture, musical instruments and home entertainment equipment.

The conference will reconvene to update the figures in March, during the first half of the 60-day Legislative session.

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News Service of Florida Staff
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