TALLAHASSEE, Fla. – State economists made a significant adjustment to general-revenue projections on Tuesday, raising the estimates by approximately $2.18 billion for both the current fiscal year and the following year. This increase provides a boost to lawmakers as they work on formulating a new budget.
However, it is important to note that more than $700 million of the increased revenue has already been allocated for specific purposes such as hurricane assistance and home-hardening programs. Additionally, a long-range forecast indicates that the state can expect mostly moderate annual revenue growth, ranging from 1.6 percent to 2.9 percent, after the current fiscal year ends on June 30.
Lawmakers may face tough decisions as they prioritize projects with substantial price tags in light of these projections. General revenue, which includes sales taxes, plays a critical role in funding essential programs such as education, healthcare, and prisons. The Revenue Estimating Conference, a panel of economists, periodically revises these general-revenue estimates.
The projections released on Tuesday replace the estimates issued in August and will serve as the basis for budget negotiations for the 2024-2025 fiscal year, which begins on July 1. The majority of the projected revenue increase, approximately $1.591 billion, is expected to occur during the current year.
Amy Baker, coordinator of the Legislature’s Office of Economic & Demographic Research, expressed confidence in the stabilization of the forecast environment since August. However, she also highlighted potential disruptions that could arise from geopolitical events, national fiscal-policy decisions, and future actions by the Federal Reserve.
Baker stated, “Things are much more stable. We have a lot of confidence in what we’ve seen that was reflecting a good level of (economic) activity for a variety of reasons. It’s going to last a little bit more. But long term, once you get out of this year, there really wasn’t a big change to either our national or our Florida economic forecasts. So, it didn’t warrant persisting that level of change or that kind of a change into future years.”
The forecast projects a revenue increase of around $585.5 million, or 1.6 percent, for the 2024-2025 fiscal year, and $505.9 million, or 2.3 percent, for the 2025-2026 fiscal year. Furthermore, the outlook predicts a rise of $586.5 million, or 2.9 percent, for the 2026-2027 fiscal year and $458 million, or 2.7 percent, for the 2028-2029 fiscal year.
In the August forecast, economists removed the possibility of a “mild” recession that had been included in earlier predictions. General revenue collections through December exceeded the August forecast by $1.26 billion, marking a 6 percent increase. Stephanie Massengale, who oversees monthly revenue and financial-outlook statements for the Office of Economic & Demographic Research, attributed this growth primarily to higher-than-expected sales-tax collections, which were 4.1 percent above projections. Other contributing factors include increases in corporate income taxes, favorable interest rates leading to higher earnings on investments, and insurance premium taxes.
While inflation has contributed to the rise in sales-tax collections due to increased prices on goods, it has also resulted in consumers relying more on credit. This recurring trend has raised concerns among economists, as highlighted in monthly reports.
In conclusion, the revised general-revenue projections provide lawmakers with additional resources as they navigate the budgeting process. However, challenges lie ahead as they grapple with tough decisions and prioritize projects in light of the projected moderate revenue growth. The stability of the forecast environment instills confidence, but potential disruptions from various factors necessitate caution. Ultimately, these projections will shape the budget negotiations for the upcoming fiscal year and impact critical programs that rely on general revenue.