TALLAHASSEE – State economists on Wednesday raised revenue projections for the current and next fiscal year by a total of about $2 billion, giving lawmakers a boost as they begin drafting the budget for the 2025 legislative session.
A group of economists called the Revenue Estimating Conference said about half of the expected increase would come from expected returns from historically high government investments secured by favorable interest rates.
But economist Amy Baker, coordinator of the UK legislature’s Office of Economic & Demographic Research, said economic uncertainties remained regarding consumer savings and global issues such as conflicts in the Middle East that could impact oil and gas prices.
“We haven’t changed our mindset dramatically on anything,” Baker said. “We adjust our mindset. We change the timing of certain events. But we haven’t fundamentally changed anything about a $50 billion general revenue fund.”
The projections replace estimates released in January and will be updated before lawmakers return for the 2025 session, which begins March 4.
Senate President Kathleen Passidomo (R-Naples) said in a memo to senators that the increased revenue estimates showed that “Florida’s economy is healthy and growing.”
“Although there is always some economic uncertainty, we are now in a somewhat stronger position than at the beginning of the year,” wrote Passidomo.
Passidomo said the new estimates would be incorporated into a long-term fiscal outlook that a joint legislative committee is expected to approve next month. She said that outlook will also reflect the end of three years of “higher, one-time spending during the pandemic” that was funded by federal funds.
“We know that the timeline for spending pandemic funds is coming to an end, and we will need to continue to make smart, fiscally responsible adjustments to move our budget toward post-pandemic spending levels that are balanced and sustainable over the long term,” Passidomo wrote.
The economists raised revenue forecasts by $934.3 million for the current fiscal year, which began July 1, and by $1.1 billion for the 2025-2026 fiscal year.
Projected returns on state investments were increased by $546.4 million for the current fiscal year and by $478.1 million for the 2025-2026 fiscal year.
Estimates for sales tax, traditionally the largest source of revenue, were increased by $504.7 million over the biennium. Estimates for corporate income tax were increased by $462.5 million.
The forecast continues to assume a “soft” landing for the economy. Last year, economists dismissed the prospect of a “mild” recession that was included in earlier forecasts.
However, the panel has long raised concerns about personal savings rates. While consumers were putting cash aside at the start of the COVID-19 pandemic, savings rates have fallen.
“Not all of them, but a significant number of people have now exhausted all their savings,” Baker said. “They’re starting to max out their credit cards and they’re still facing high prices and we’re not affected by that. We’re not assuming disinflation anywhere in our forecast. So they’re facing challenges. We’re aware of that.”
On Wednesday, the U.S. Bureau of Labor Statistics reported a 2.9 percent increase in the consumer price index from a year ago, the smallest increase in more than three years. While food prices are up 1 percent from a year ago, housing costs continue to rise, which remains a key issue in Florida.
The new inflation rate should allow Fed officials to cut interest rates in September.
