An economic downturn is still in the cards, economists predict, but sales tax collections continue to surge, leading to a rosier revenue picture.
Continued strong sales tax collections led Florida state economists to increase their predictions for how much revenue the state will receive over the next two fiscal years by $5.3 billion, despite fears ballooning inflation and higher interest rates will put a significant crimp on the economy next year.
Revenue collections for June were $4.53 billion, or $978.7 million (27%) above the estimate, pushing overall revenues for the fiscal year that ended June 30 to $44 billion, or $3.85 billion above economists’ projections. Sales taxes were the main portion of that increase, coming in $2.6 billion above estimates.
That strong showing led the Revenue Estimating Committee and the Office of Economic and Demographic Research to raise their previous revenue forecast for the 2022-23 and 2023-24 fiscal years by $5.3 billion on Tuesday. The increase, though, still reflects a decrease in anticipated revenues for the current fiscal year by nearly $1 billion.
The shocks of the pandemic are still reverberating through the national and state economy, and while federal stimulus helped to mitigate the effects of the COVID-19-induced downturn, rampant inflation at levels not seen in 40 years has led to fears of another economic downturn.
On Tuesday, economists struggled with when that downturn will hit, how deep it will go and how swiftly the state will rebound. Some warning signs such as housing deals that were nixed close to the sale, increased use of consumer credit and a decrease in savings have economists jittery despite the rosier predictions.
“Economic disruption is still evident, with challenges including the end of significant federal monetary and fiscal stimulus provided during the early years of the pandemic, the rapid drawdown of savings over the past year, the elevated use of credit over the past few months, the continued normalization of spending on services and away from taxable goods, and strong inflationary pressures on households,” the report from state economists reads.
The increases to the projections ostensibly mean lawmakers will have more money to use when they craft the 2023-24 budget during the next Regular Session in March. But the EDR will revise its revenue forecasts before then, and if the anticipated economic downturn hits before March, lawmakers could be looking at a skimpier revenue picture.