Economists again cut revenue estimate
TALLAHASSEE (AP) – State economists Tuesday reduced their estimate of Florida’s general revenue by $147.1 million for the current budget year – far less than the billions in shortfalls over the past two.
Those earlier revisions had forced special legislative sessions to cut spending, shift funds and take other steps to avoid deficits.
But the $66.5 billion budget for the current fiscal year that began July 1 includes more than enough reserves – about $1.6 billion – to absorb the new shortfall without bringing lawmakers back to Tallahassee.
The forecast for $20.7 billion in general revenue – money that supports most day-to-day expenses such as salaries for teachers and state workers – is only 1 percent below the last estimate issued in March.
The economists made an even smaller adjustment for the 2010-11 budget year, reducing it by $44.2 million for a total of $22 billion – an increase of 6.8 percent over the current year.
If the 2010-11 forecast holds up, it would mark an end to four consecutive years of declining general revenue. General revenue collections, though, are not expected to top their 2006-06 levels within the next three years.
Amy Baker, coordinator of the Legislature’s Office of Economic and Demographic Research, said the March estimate has held up better because the state’s economy hasn’t suffered the kinds of shocks that knocked gaping holes in prior forecasts.
“We went from our housing shock through a national recession through the credit crisis through the global recession,” Baker said. “So, what you’ve seen is for the first time we’ve had a period of time that was stable.”
That stability also has resulted in four straight months of revenue collections that have come in slightly over the March estimate, including figures released Tuesday showing a modest surplus of $46 million for July.
The new forecast is one of three the economists make every year. This one will be used to develop an annual three-year financial plan. Estimates usually made in November form the basis of the governor’s budget recommendations. The Legislature then uses the March forecast to finalize the budget.
Baker said the economists had to “tinker with” the estimate Tuesday mainly because they had misjudged Florida’s unemployment rate.
The March forecast was based on the assumption it would peak at 10.2 percent, but it has since reached 10.6 percent and is expected to hit 11 percent before leveling off, Baker said.
“Pretty much every adjustment we made today was linked to that employment forecast,” she said.
The biggest change was to the estimate for sales tax proceeds – the largest part of the state’s general revenue total.
The economists dropped the sales tax forecast for the current year by $312 million for a total of $15.6 billion. The biggest part of that cut – $240.5 million – came out of the business investment sector that includes commercial rentals and purchases of equipment, furnishings and supplies by businesses.
Department of Revenue economist Frank Williams said business spending is expected to lag behind a turnaround in the faltering economy that’s forecast to begin in the spring of 2010 but not reach full recovery until a year later.
“Only after businesses realize that increases in sales are permanent will they be likely to go out and expand current operations,” Williams said.
The economists also reduced the forecast for sales taxes generated by consumer spending on nondurable goods.