Florida Senate Appropriations Committee Plans Budget for Uncertain Future

by | Jan 14, 2021

“What’s certain is the uncertainy,” remarked Florida Senator and Appropriations Chair Kelli Stargel, following an hour-long update on the economic forecasts senators will use to develop the state budget for the upcoming year.

The Office of Economic and Demographic Research Coordinator Amy Baker told the senate appropriations committee, “We usually have a great deal of confidence in our forecast. This time we have a large measure of uncertainty we don’t usually have.”

Her greatest areas of uncertainty include education, Medicaid and commercial real estate.

The area of greatest concern is tourism. Baker told the committee, the immediate risk to the state’s general revenue is the tourism industry. It accounts for nearly 15 percent of all sales tax collected by the state.

“Tourism is the area hardest struck (by the pandemic and resulting shutdowns in business and travel) and will take the longest to recover,” Baker said.

She expects tourism to be the last industry to recover and said it could take as long as two years to show significant improvement. She said domestic and in-state tourism is picking back up as tourists feel more confident driving in their own cars to tourist destinations than flying. Consequently, she expects international tourism to recover last.

As for unemployment, Baker said that 2020 was a year of the lowest lows, followed quickly by the highest highs. Prior to the pandemic, unemployment was at a 50 year low in Florida. Once the pandemic hit, it quickly soared to a 50 year high.

“The change was breathtaking,” Baker told the committee.

Unemployment held at 6.4 percent from October to November.

She said she is also concerned about commercial real estate as small businesses were the most susceptible to closures and bankruptcies and renters were wanting less space and lower rents.

One of the bright spots is home ownership. Baker said, “A remarkable thing came out of the federal response (to the pandemic). The Federal Reserve reduced interest rates to near zero. It had an immediate effect on the housing market. The housing market has held up and is growing strongly.”

She said the flip side of that trend is that the rental market has declined as people move from being renters to being first-time homeowners.

Despite recent good signs of economic growth, Baker warned the committee she believes the state will only have about $600 million more than was estimated last fall when the state was hit with projections of a $5.4 billion shortfall in general revenue over the next two years.

Baker told the committee, “We went so low that even with strong growth rates, we won’t be back to where we want to be.”

She said people were feeling good about a better-than-expected recovery this summer, but are starting to draw back that optimism.

Stargel said the work before the appropriations committee was “unprecedented” but she was confident it would come to the right solutions.

One of those solutions may be collecting state sales tax on items bought from internet retailers and delivered to Floridians. Representative Chuck Clemons and Senator Joe Gruters filed bills to collect those taxes and potentially bring hundreds of millions of dollars into the state coffers.

Stargel said she believes that legislation would likely pass this time, and that it wasn’t a new tax, it was just the formalization of the collection of those taxes.

Currently the collection of the tax is sort of on the honor system. “Let’s be honest, most of us did not do that, and even if you wanted to, that process was not easy,” she said.

She also said spending on infrastructure may have to wait until better economic times.

“Florida is doing better than other states. But we’re gonna have a conservative budget. It’s a tough budget year,” she reiterated.


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