TALLAHASSEE — Despite high unemployment and record household saving this year, the state saw better-than-expected sales and corporate income taxes to close out 2020, prompting state economists to project rosier estimates for the state’s general revenue over the next several years.
State economists said Monday that Florida’s economy is doing better than they feared in August, when they expected a $5.4 billion revenue shortfall for the state over the 2020-21 and 2021-22 fiscal years. Instead, collections were strong to close out the year, and economists shaved $2.1 billion off of that earlier estimate.
Collections were higher than expected “despite reduced profitability, business failures and delayed business formations,” economists wrote.
“It’s very surprising on the surface,” said Kurt Wenner, vice president of research for Florida TaxWatch, which advocates for limited government spending. “It’s hard to believe that we’re bringing in the revenue that we are.”
The revised estimates are good news for DeSantis, who will rely on the new numbers when he releases his proposed budget for the next fiscal year. General revenue, made up primarily of sales and corporate income taxes, pay for schools, government and a host of other programs and projects.
When state lawmakers meet in March to finalize the budget for the 2021-22 fiscal year, they will have an estimated $33.6 billion in general revenue to spend, according to the latest estimates. That’s still down nearly $2 billion from pre-pandemic expectations.
State economists improved their estimates from August in all the main sales tax categories but one: the tourism and recreation sector, the state’s main economic driver.
“While the situation is getting better, the tourism sector is still struggling,” said Esteban L. Santis, a revenue and budget policy analyst at Florida Policy Institute, a left-leaning think tank.
Monday’s estimates came after a day and a half of unusually contentious debate among state government’s top economists.
Representatives from the governor’s office, state House and Senate and the state’s Office of Economic and Demographic Research collectively agree on the state’s revenue estimates for the next fiscal years.
Their meetings are typically staid, involving detailed discussions about the hundreds of taxes and fees the state collects, and examinations of national and global economic trends.
But on Friday, the group couldn’t come to an agreement about what Florida’s economy would look like over the next 18 months. The governor’s representative, Holger Ciupalo, strongly disagreed with his three counterparts, believing state revenue would be even better than expected.
Amy Baker, the state’s chief economist, pushed for more cautious figures. Because lawmakers rely on the economists’ estimates to set the budget, if those estimates are too high, the state could run the risk of deficit spending.
The debate wasn’t resolved on Friday, forcing them to come back and resolve the dispute on Monday. Tensions were still high. At one point, Baker rebuked Ciupalo to “please be a little more respectful of our analysts.”
“It’s been a long time since I saw a disagreement like that,” Wenner said.
Economists estimated the state will rebound quickly in 2022 and 2023, thanks to widespread rollout of the COVID-19 vaccines.
