Economists on Friday added $2.77 billion to the state’s general-revenue tax projections for the current fiscal year and next fiscal year, giving lawmakers more money to play with when they start drawing up a budget.
The economists, who serve as the state Revenue Estimating Conference, had included the prospect of a “mild” recession in a forecast earlier this year. But the panel now expects more stability in most economic areas as Florida moves beyond the COVID-19 pandemic.
“Explained in part by the recession’s failure to materialize, revenue collections have exceeded expectations since the last conference (meeting),” said Amy Baker, coordinator of the Legislature’s Office of Economic & Demographic Research.
Lawmakers will use the new projections as they put together a fiscal year 2024-2025 budget during the legislative session that will start in January. State fiscal years begin in July.
General revenue plays a critical role in funding programs such as education, health care and prisons.
The new projections were driven by sales-tax collections and documentary-stamp tax collections on real-estate sales, as “the housing slowdown is less than previously expected,” Baker said.
Still, economists anticipate fewer federal dollars flowing into Florida than during the pandemic. Also, they pointed to a need to further review Medicaid spending. The panel meets periodically during the year to update projections.
Baker said during a break from Friday’s meeting that conditions have been “stabilizing” for the first time in three years.
“They're either back to normal or back to a level that they're going to have normal growth rates going forward,” Baker said. “So, even though we have big discussions about all these forces coming into play, for the first time, we have a reasonable margin of what it's going to look like going forward because everything is much more stable.”
“For the first time it is getting much more predictable, which is really good,” Baker later added. “We're beyond the pandemic noise.”
The economists had earlier expected a mild recession in the first quarters of this year. But that expectation has been removed based on national forecasts, Baker said.
“Among economists that's still hotly debated, not necessarily this group, but if you read all economists, whether the Fed (Federal Reserve) is going to be able to manage this without a recession is still up in the air,” Baker said.
The panel does not expect inflation to unwind over the next year.
“We think it's still going to be elevated through about mid-2025,” Baker said. “So, it's a very slow unwinding process to get back to that 2 percent where the Fed wants it to be.”
Inflation has helped increase sales-tax collections because of higher prices on goods. But the lingering inflation isn’t expected to have the same effect.
“We're getting to that point where it's tipping, right?” Baker said. “We always knew we’d get there. At some point you have enough people that are struggling to pay rent and their electric bill and food bills, that they start not buying or holding back.”
Economists issue monthly tax-collection reports that have repeatedly shown the state topping projections. But the reports also have warned that consumers are saving relatively little money.
Friday’s projections came a day after Fitch Ratings affirmed Florida's AAA credit rating.
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