Florida Lowers Revenue Projections as Sales Taxes Lag Behind Forecasts
Florida, the fourth-most populous state, reduced its revenue forecasts for this fiscal year and next as slower-than-expected economic growth cut sales-tax collections.
General revenue will be lower by $585.7 million in the year that ends June 30, or 2.6 percent less than was projected in August, Amy Baker, the Legislature’s chief economist, said at a meeting of forecasters in Tallahassee today. In fiscal 2012, revenue will be 2.5 percent below the previous estimate, or $612.2 million less, she said.
Sales taxes bring in about three-quarters of revenue in Florida, which has no levy on personal incomes. Sales taxes were $88.3 million short of estimates in the first four months of this fiscal year and account for more than half of the full-year revision and almost 80 percent of 2012’s. Even with the lower forecasts, overall revenue is expected to grow 4 percent this year from last year and by 7.5 percent in fiscal 2012.
“The adjustments to the forecasts are indicative of an economy that is still in the early stages of an abnormally slow recovery,” said Baker during a webcast.
Standard & Poor’s, which assigns Florida its highest credit rating, cited declines in revenue as a reason for its negative outlook of the state in an Oct. 19 note. While S&P said revenue had shown “some indication of stabilizing,” it said declines in home values and high unemployment will affect sales taxes.
Higher Than Nation
Florida’s unemployment rate, at 11.9 percent in October, was 2.3 percentage points higher than the national average. Home prices in the state have fallen 41 percent since their peak in the fourth quarter of 2006, according to data from the Federal Housing Financing Agency.
Lower-than-projected revenue will add to Florida’s $2.5 billion budget deficit, Baker said in a Dec. 9 interview. She estimated that next year’s budget gap would surpass $3 billion.
Florida’s governor-elect, Rick Scott, who campaigned on promises to cut property and business taxes and spending, will have to contend with the larger budget gap when he takes office next month.
Lower than previously anticipated income and consumer confidence as well as a higher savings rate contributed to the slower projected growth in sales taxes, said Michael Duckett, an analyst with the Governor’s Office of Policy & Budget, one of the three offices that work on the forecast.
“Given the fact that we have a somewhat weaker economic forecast, I tended to lean toward the weaker side,” he told the conference.
Lower projected revenue from auto purchases made up the largest portion of the cuts to sales-tax forecasts. Collections are expected to be $176.4 lower this year than previously estimated and $197.9 million lower next year.
Corporate income tax, the second largest component of Florida’s revenue, fell short of the prior estimate by $193.2 million this year and $44.2 million next.