State economists raised Florida’s forecast general revenue last week by about $5.3 billion, despite concerns about an economic ‘downturn’ this fiscal year and an expected slowdown in the housing market in fury.
The revised projection means state lawmakers will have more money to play with when crafting a budget in the 2023 legislative session.
But economists, acting as the state earnings estimation conference, acknowledged significant forecasting challenges as they put together the latest estimates. Inflation has helped drive sales tax collections to beat expectations, but economists have struggled to predict major turning points associated with a slowing economy.
“The risk associated with the national economic forecast is skewed downside with almost equal likelihood that the new forecast will play out as expected or fall short of expectations,” said Amy Baker, coordinator of the Bureau of Economic and Demographic Research at the Office of Population and Economics. ‘Legislative Assembly. conference statement.
“Economic disruption is still evident,” Baker continued, “with challenges such as the end of the significant federal monetary and fiscal stimulus provided during the early years of the pandemic (COVID-19), the rapid reduction in the savings over the past year, the rise in the use of credit in recent months, the continued normalization of expenditure on services and excluding taxable goods, and the strong inflationary pressures on households.
The panel meets periodically throughout the year to update estimates of general revenue, a critical source of funding for schools, health programs and prisons. These estimates are used by legislators to establish an annual budget. The next revision is expected in February, before the start of the 2023 session in March.
Economists raised the projected general revenue amount for the current 2022-23 fiscal year by $3.45 billion and raised the projection for the 2023-24 year by $1.82 billion. Baker said the biggest adjustment last week was in sales tax revenue, up $3.6 billion over the two-year period.
Higher-than-expected sales tax collections are attributable to continued increases in consumer spending on goods and the early effects of inflation, which is pushing up prices and, therefore, sales tax revenues .
But Baker said sales tax collections risked seeing consumers revert to more typical management of their personal budgets amid rising inflation.
The second most important adjustment concerned the corporate income tax. Economists have raised the projections for those taxes by $1.17 billion over the two-year period.
Before deciding on the projections, economists debated several issues, including the future of Florida’s real estate market, which has seen a rapid rise in prices in recent years.
While taxes on documentary stamps on real estate transactions are expected to remain high, forecasts point to a slowdown in 2023 and a stable market in 2024 due to rising mortgage and insurance costs.
The question is how much the state will suffer from current sales and for how long.
Holger Ciupalo, policy coordinator for the governor’s Office of Policy and Budget, said the market is still seeing demand and not growing on the basis of speculation, as it did when the housing market slumped. broke out before the 2008 recession.
“What happened during the housing crisis was a lot of property turnover… artificial demand,” Ciupalo said. “People didn’t really need the houses to move in. They are basically bought and sold themselves. … And as a result of artificial demand disappearing, yes, sales fell and prices fell. This here is based on actual demand from people actually moving into houses. It’s a different price driver. And that won’t change. »
Baker said the state is already experiencing an increase in breaches of pending real estate contracts, speculating that buyers are often unable to lock in lower interest rates before closing or, to a lesser extent, simply worried about taking major commitments.
Baker said broken contracts reached 26.7% of pending sales at Lakeland, 25.7% at Cape Coral, 25.7% at Port St. Lucie, 25.3% at Jacksonville, 21.5% at Miami, 24.9% in Palm Bay, 23% in Tampa, 24.5%. percent in Orlando and 21.9 percent in Pensacola.
“That means sales, where homes were skyrocketing before they even came on the market, in some cases are starting to falter,” Baker said.