Yesterday, the Florida Office of Economics and Demographics Research released the September Revenue Report providing details regarding receipts and distributions to the State’s general revenue fund during the month of September. This report generally reflects August retail sales tax activity.
Florida’s general revenue fund is the main source of discretionary funding for the State. In January 2020, the State’s economists estimated that the State would receive $36.2B in general revenue during the State’s fiscal year that ended June 30, 2020. Of that amount, approximately $2B in the anticipated revenues were projected to be surplus funds which would have rolled over to the current state fiscal year as reserves. Unfortunately, the pandemic’s historic impact on the economy slashed anticipated state revenues. And ultimately, the State finished the last fiscal year nearly $1.9 billion below those estimates, which represented a 5.7% loss from the expectations prior to COVID-19.
The Status of the Current State Budget
Pre-pandemic, economists projected the State would receive $36.5B in general revenue during the current July 1, 2020 – June 30, 2021 state fiscal year. In mid-August, those economists reduced the general revenue forecast by $3.4B due to continued anticipated losses as a result of the pandemic. The majority of this loss estimated would be due to projected overall sales tax declines of $2.8B. The majority of these sales tax losses were anticipated in the tourism & recreation sector which includes not only out-of-state tourists, but also sales to Florida residents at restaurants, local attractions and other leisure-based activities which have been negatively affected by the pandemic.
Thankfully, since the August forecast, state revenue collections have exceeded expectations. General revenue collections for August and September were positive, posting net gains of $177.3M and $230.2M, respectively. This two-month gain of $406.1M has certainly softened the anticipated losses. However, the better than anticipated receipts are $228.9M less than the pre-pandemic forecasts for the same months.
According to the economists, this latest state revenue report reflects activity that largely occurred in August which benefited from the release of pent-up demand and some consumers’ ability to draw down atypically large savings that built up during the pandemic. Five of the six sales tax categories came in above the new estimates, with three actually gaining over the September 2019 levels. The most significant over-the-year loss is attributed to declines in the tourism and hospitality-related industries, dropping receipts 28.2% below collections for the Tourism category in September 2019. Economists project tourism may not recover until a vaccine for COVID-19 is widely available to the public.
CARES Act Funds
Florida received $5.856 billion under the federal CARES Act. These funds were placed in the State’s general revenue fund pending the State using those funds for qualifying expenses. These federal funds ensured the sever losses to State revenues from April through July did not fully deplete the State’s general revenue fund and reduce the ability for the State to provide necessary services.
However, there is still a high degree of uncertainty surrounding the future allowable uses of these federal CARES Act Funds by states and local governments. It is also uncertain whether Congress will provide additional guidance regarding the use of these funds before the end of the current calendar year deadline. State economists note, to the extent that the funds cannot be used to fill revenue shortfalls or offset current appropriations when they are used for pandemic-related purposes, or if additional COVID-19 expenditures are required, the Fiscal Year 2020-21 ending balance shown in the mid-August forecast could be lower, and potentially becoming negative. If the State revenue receipts continue to exceed expectations, which I anticipate will occur, it will reduce this risk.
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