from Takeaways from Tallahassee
by Peter Schorsch
December 13, 2021
Florida’s gross domestic product is expected to increase by 4.5% this fiscal year, according to the latest estimates from state economists, down from the 7% rate the state experienced in the first and second quarters of this year.
The state GDP fell 1.7% in the first quarter of 2020 before tumbling 31.1% in the second quarter. The third quarter was a completely different story, as the state recouped nearly all of that. And the trend has been up ever since.
However, the Sunshine State’s brisk recovery from the COVID-19 pandemic is expected to slow in the coming years, to a more normal 2.5% GDP growth for the next three coming fiscal years.
Florida’s economic standing is particularly notable right now, as the focus shifts to the 2022-23 fiscal year after Gov. Ron DeSantis outlined his budget proposal Thursday. His recommendations nearly hit $100 billion, with additional requests putting spending over that mark.
DeSantis finds himself with an estimated $7 billion general revenue surplus, but nearly three quarters of that is in nonrecurring dollars.
Still, the Governor has managed to set aside $15 billion in reserves in his budget proposal. Under favorable conditions, he told reporters he expects that to hit $17 billion.
Since the latest general revenue estimate, issued in August, collections have run $1.2 billion over estimates through October. Nearly two-thirds of the increase came from sales tax collections.
Contributing to the additional sales tax collections is the Wayfair bill, which is helping to bring in sales tax from more online marketplaces. However, the additional collections are coming mainly for other reasons.
The most recent round of stimulus checks has boosted household spending. However, that is expected to wane in the coming months.
And even though the pandemic is improving, the service sector is still being impacted. Spending is still being pushed more toward goods.
Inflation is also increasing sales tax collections. Higher prices mean the state is receiving more revenue, at least in the short term. In the coming months, people will likely be buying cheaper products or fewer products. Plus, more of people’s spending could end up going toward nontaxable items like food and health care.