COVID-19 Impacts on Florida’s General Revenue Fund & Economic Forecast

Today, the Florida Revenue Estimating Conference met to estimate and forecast the State’s future general revenue collections for the first time since the start of the COVID-19 pandemic.  The Executive Summary of the Conference is available by clicking here.

Florida’s general revenue fund is the main source of discretionary funding for the State.  At the previous general revenue forecast in January 2020, the State’s economists estimated that the State would receive $36.2B in general revenue during the State’s July 1, 2019 – June 30, 2020 fiscal year and $36.5B in general revenue during the State’s July 1, 2020 – June 30, 2021 fiscal year.

However, due to the pandemic, general revenue receipts declined sharply in the last quarter of the State fiscal year ending June 30th.  Ultimately, the State finished the last fiscal year with a general revenue loss of nearly $1.9 billion or 5.7 percent.  A summary of some of the major tax types  (and italicized subcategories) significantly impacted by COVID-19 are outlined below.

2020-2021 General Revenue Forecast

State economists estimate that the pandemic will reduce the general revenue fund by additional $3.4 billion in the current State fiscal year, July 1, 2020 – June 30, 2021.  The majority of this loss will be due to projected overall sales tax declines of $2.8 billion.  The majority of these sales tax losses are 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.

Additionally, the economists estimate nearly $500 million in corporate income tax losses, despite July corporate income tax collections coming in $134 million over estimate.  Economists believe the July corporate income tax collections were higher due to taxpayers paying Florida corporate income tax at the same time as the federal tax, which was delayed to July 15^th.  Even though, Florida only extended its corporate income tax payment deadline until June 1^st.  Ultimately, reduced profitability, business failures and delayed business formations are expected to drive corporate income tax receipts down the next two state fiscal years.

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.  Due to the unknowns surrounding the qualifying uses of such funds, the Revenue Estimating Conference provided the following footnote to its General Revenue Outlook Statement:

The Coronavirus Aid, Relief, and Economic Security [CARES] Act provided substantial federal government support to individuals, businesses, hospitals, and specific industries dealing with the COVID-19 pandemic and its associated economic consequences. [Public Law No: 116-136; enacted 03/27/2020] Among other things, the legislation created the Coronavirus Relief Fund within the U.S. Department of the Treasury to fund necessary state and local government expenditures incurred due to the COVID-19 public health emergency. The funds currently can be used only for costs not accounted for in the budget most recently approved as of March 27, 2020, and incurred during the period from March 1, 2020, to December 30, 2020. Florida’s total allocation was $8,328.2 million, of which $2,472.4 million was distributed by the US Department of the Treasury directly to Florida local governments with populations greater than 500,000. The remaining $5,855.8 million was transferred to the State of Florida.

All Relief Fund dollars received by the state have been shown on this outlook as they were received. They have only been debited to the extent that formal budget actions have already occurred. However, there is a very high degree of uncertainty surrounding the future allowable uses of these dollars by states and local governments. 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 this outlook will be lower, potentially becoming negative. While today the funds may not be used to fill shortfalls in state or local government revenue (with the exception of covering expenditures that would otherwise qualify), full or partial relaxation of this prohibition is an active part of the negotiations currently underway in Washington. As of the date this outlook was adopted, there was no agreement on the provisions of an additional federal package. There is also continuing discussion of additional guidance from the U.S. Department of the Treasury on the existing provisions. Different treatment in the financial outlook may be warranted in the future.

COVID-19 Expenses

The updated outlook statement includes a list of significant COVID-19 expenditures already incurred by the State including:

• COVID-19 Bridge Loans: $50M spent
• COVID-19 Response 2019-2020: $460.8M
• CARES Act Funds to Local Governments: $318.8M
• COVID-19 Response 2020-2021: $646.2M
• CARES Act Housing Assistance: $250M

 Florida’s 2020-2021 Budget

On March 19th, the Florida Legislature approved a 2020-2021 budget of $93.2 billion, of which $35.191 billion would be general revenue.  At the end of June, Governor DeSantis approved this budget with more than $1 billion in total general revenue vetoes ($487.8M) and trust fund vetoes. 

Based on the outlook, the State is projected to spend $35.792 billion in the 2020-2021 state fiscal year, even though that amount does not account for any state agency budget holdbacks requested by the Executive Branch. Therefore, one would conclude that the State will need to be able to use at least $4.489 billion of the CARES Act funds (76%) or use some of its roughly $2.2 billion in reserves in order for the general revenue fund to remain solvent in the coming state fiscal year.

We hope this information has been helpful.  If you have any questions, please contact French at 850-459-0992.