Florida's long-range financial outlook isn't pretty.
Forecasters believe the state will have $3.4 billion less revenue than anticipated to support the state's general fund this fiscal year due to the severe effects of the coronavirus pandemic particularly on tourism, the state's top economist said.
In fiscal 2022, there’s expected to be $2 billion less revenue to spend and in 2023 the deficit will be $1 billion, Amy Baker, coordinator of the Legislature’s Office of Economic and Demographic Research, told lawmakers in a Sept. 10 presentation.
The biggest hit to the general fund will be state sales tax collections, which account for 79% of total revenues supporting the budget. Florida relies heavily on its 6% sales tax because a state income tax is constitutionally prohibited.
Baker said estimated sales tax revenue losses will be $2.84 billion in fiscal 2021 and $1.25 billion in 2022, with about half of the loss each year attributed to the hard-hit tourism and recreation industries.
“The big driver is clearly the pandemic,” Baker said. “Our belief is that tourism is going to take two to three years to recover, and it will be the longest-recovering sector that we have.”
In fiscal 2018, households paid 63.2% of sales taxes, businesses paid 23.5%, and tourists paid 13.4%. Preliminary data indicates that tourism accounted for 14.5% of sales taxes paid or $3.7 billion in fiscal 2019, according to the outlook report.
The Republican-led Legislature has refused calls by Democrats to convene a special session to review the budget in light of the steep drop in revenues.
The majority of lawmakers have deferred spending decisions to Gov. Ron DeSantis, also a Republican, including where to disburse $5.8 billion the state received from the Coronavirus Aid, Relief, and Economic Security Act.
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During Baker's presentation, some lawmakers questioned how the funds were being used because the governor hasn't provided a detailed accounting.
The government watchdog group Florida TaxWatch also warned that if the $5.8 billion in CARES Act funds can't be used for traditional appropriations the state's expected "deficit will be bigger."
When asked about the dim outlook forecast, DeSantis said he sees that many businesses "have done very well this summer, which is a good sign," and that he thinks the state's theme parks are picking up visitors.
DeSantis stripped $1 billion before signing a $92.27 billion budget two days before it took effect on July 1. It includes $2.3 billion in unallocated general fund revenue as part of the state’s reserves; $1.7 billion in the budget stabilization fund; and $1.5 billion in trust funds and tobacco reserves, if needed.
Besides the ongoing COVID-19 pandemic, there are also low probability, high-impact events called "black swans" that Florida's economists believe are closer to occurring than in past years that could also severely impact the state's finances.
At the top of the black swan list is a severe natural disaster, such as a major hurricane, that could exhaust the state's reserves, Baker said. The full financial impact of Hurricane Irma, which swept the state in 2017, is still unknown as are the full cost of damages caused by Hurricane Michael in 2018, which made landfall in Florida's panhandle in 2018.
Weather forecasters were watching seven tropical disturbances in the Atlantic basin as of Monday. The peak of hurricane season, when more damaging major hurricanes are likely to develop, runs from mid-August to late October. The season technically ends Nov. 30.
A second potential black swan event could be a "significant second recession" as a result of the ongoing pandemic. Baker said the state has already experienced a recession, but if there's a "double dip" or second recession the recovery forecasters expect would disappear.
Florida lawmakers use the three-year long range financial outlook to prepare the annual state budget. The session starts March 2.
