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Economists Forecast Further Drop In State Revenue

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The Associated Press

Published: March 14, 2009

TALLAHASSEE - Lawmakers got the bad financial news most were expecting Friday when state economists said they now expect general revenue to be down about $1 billion in the current budget year and more than $2 billion in the next one compared with estimates made four months ago.

That gloomy forecast will throw the current budget, which runs through June 30, into deficit territory. Also, for the fourth time in a row, overall general revenue is expected to be lower in the next budget year than it was in the previous one.

The Legislature will use the new estimates to draft the 2009-10 budget and modify the current $65.5 billion budget. General revenue - mostly sales tax collections - accounts for about a third of each budget, but lawmakers have little control over money in the rest of the budget.

It's largely federal dollars for such purposes as Medicaid and trust fund collections that must be spent for specific purposes, such as fuel taxes for transportation and utility taxes for school construction.

The somber forecast came as no surprise because general revenue collections since the last estimate in November already have fallen more than $200 million below that projection.

The previous estimate was off because the economists did not foresee as big a reduction in consumer spending as actually occurred, particularly during the holiday season, and they had expected the national credit freeze to thaw by now, but it hasn't, said Amy Baker, coordinator of the Legislature's Office of Demographic and Economic Research.

About 80 percent of the forecast revenue reductions are in sales tax collections. It's down because fewer tourists are visiting the state and Floridians are spending less for everything from automobiles to clothing.

"Part of it may be a shifting of expenditure patterns from more high-end boutique types of clothing stores and general merchandise stores to more along the lines of the Targets and Wal-Marts," said Department of Revenue economist Frank Williams.

Economists also cut estimates for almost every other source of general revenue, including corporate income tax, beverage taxes and licenses, insurance premium taxes and taxes on real estate transactions and lending.

Sen. Ted Deutch, D-Boca Raton, is hoping the new estimate breathes life into his proposal to increase the cigarette tax by $1 a pack, which has drawn opposition from many of the Republicans who control the Legislature. The state's current tax of 33.9 cents per pack is among the lowest in the nation.

"When you see that the state spends $1.3 billion through Medicaid on tobacco-related illnesses and collects only $430 million from tobacco users, you can hardly be surprised by the balance sheet our economists handed us," Deutch said. "A dollar increase on cigarettes is not only fair, it's clearly necessary."

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