Florida revenues down nearly $900 million as the impact of COVID-19 takes hold
Florida officials finally got their first glimpse of the impact of COVID-19 on the state's finances, and it's not pretty.
April experienced an overall combined loss of $878.1 million in general fund revenues after adjusting for refunds, from projections made at the revenue estimating conference in January, according to the Office of Economic and Demographic Research.
Most of the loss was due to a whopping decline of $598.2 million in state sales tax collections, which came in 24.1% lower than estimates.
"The presence of coronavirus in Florida presented its most serious threat to the sales tax forecast, especially to those taxes collected from tourists," according to an EDR report released Tuesday. "In addition, critical supply chains were already interrupted by the impact to other countries and retail sales displaced as a result of social distancing and crowd-avoidance behaviors.”
The 6% state sales tax is the bread and butter of Florida's budget, accounting for 79% of all revenues that support the spending plan. The sales tax is especially important because Florida doesn't have a state income tax.
State Senate President Bill Galvano, R-Bradenton, said collections, which came in $202.4 million above estimates from January to March, will help buffer the loss reflected in Tuesday's revenue report and the shortfalls expected in upcoming months.
Galvano said the April report largely reflects activity that occurred in March, before the state’s month-long lockdown.
"With the lag in reporting, it is likely we will continue to see decline in the general revenue collection report for May ... which will continue to reflect activity in April when the Safer at Home order was in place," Galvano said. "The situation continues to evolve on a daily basis and additional data in the coming weeks will be critical."
Gov. Ron DeSantis declared a state of emergency on March 9 allowing him to take certain executive actions to respond to the increase in COVID-19 cases. On April 3, he issued what he called a "Safer at Home" order requiring vulnerable people to remain at home and other residents to limit their movements to essential activities until April 30.
The next general revenue report is due out June 25, and will reflect tax collections in April.
In addition to a slowdown in sales and fall-off in tourism, Florida's unemployment rate had risen to 12.9% as of Friday. The U.S. unemployment rate is 14.7%.
The state has paid 1.01 million people nearly $3.5 billion in unemployment compensation, the Florida Department of Economic Opportunity said Tuesday. Florida pays qualified applicants up to $275 a week, for 12 weeks.
The DEO also said this week it is working to allow the unemployed to apply for an additional $600 a week through the Federal Pandemic Emergency Unemployment Compensation program. The 13-week program was authorized by the Coronavirus Aid, Relief and Economic Security Act, which was signed into law on March 27.
In addition to the decline in state sales tax collections, Florida also saw corporate income taxes decline by $246 million in April.
Florida Department of Revenue Executive Director Jim Zingale issued an order extending certain corporate income and franchise tax returns and payments. Payments due to be made in May, June and July were delayed until Aug. 3.
Highway safety fees were under-collected by $20.2 million compared with the REC estimates and corporate filing fees were down $56.9 million.
The state also saw a decline of $31.5 million in the collection of insurance taxes, counties' share of Medicaid costs, nonoperating revenues, taxes, licenses, fees and service charges.
Six revenue sources came in $40.9 million over estimates for the month and appeared to be at least initially unaffected by the negative effects of the coronavirus outbreak, the EDR said.
Documentary Stamp Taxes on real estate transfers came in $1.3 million over estimates, even though house sales are slipping in some areas of the state, including COVID-19 hot spots in Miami-Dade and Broward counties.
Collections on investment earnings were above estimates by $19 million; intangible tax collections were over by $13.3 million; beverage taxes were up by $6.3 million; tobacco taxes were $600,000 better than expected; and severance taxes were over estimates by $400,000.
The EDR said some of these tax sources are expected to experience losses in the coming months, as lagged economic effects of the virus continue to appear in future reports. The agency didn't specify which categories would see declines.
Dominic M. Calabro, president of Florida TaxWatch, a nonprofit watchdog group, said Tuesday's EDR report is "staggering and makes the economic toll of COVID-19 abundantly clear."
"With revenue collections for the month of April coming in at more than $878 million below estimates, our leaders must take action to remain accountable to the taxpayers of our state and set Florida on the right path forward," Calabro said.
The state is missing out on two "important and significant" sources of revenue — the "E-Fairness" legislation that would enable the state to collect sales and use taxes from remote internet retailers that don't have a physical presence in the state, and negotiated revenues from a gaming compact with the Seminole Tribe, he said.
Florida had received about $350 million a year through a gaming compact approved in 2010, but the state allowed it to expire in 2015 and lawmakers haven't been able to come to terms on a new agreement since.
Both House Bill 129 and Senate Bill 126 would have required remote sellers to collect the state sales tax, but they died in committees on March 14, and it’s not clear if there would be an opportunity to reconsider the legislation before next year’s session.
Florida is now one of only two states that hasn’t passed the requirement for all remote sellers to collect sales tax, which would bring in an estimated $480 million in recurring revenue annually, according to an analysis of SB 126. Missouri also hasn’t passed the requirement.
"Florida TaxWatch has long supported E-Fairness legislation and a gaming compact with the Seminole Tribe as important and significant sources of revenue and now, with the COVID-19 pandemic costing hundreds of millions in lost revenues, these changes are no longer just desirable, they are essential," Calabro said. "We cannot afford continued inaction on these critical issues. We again urge the Florida Legislature to take decisive action and activate these needed revenue sources."
The decline in April collections, less the previous revenue collection surplus of $202.4 million, means that general revenues are now $676.7 million under estimate year-to-date, he said.
"Florida’s significant reserves, as well as federal funding from the CARES Act, continue to be available for expenditures in the short-term, however with future and potentially larger revenue shortfalls expected, Florida TaxWatch will continue to monitor the state’s budget position," Calabro said.
Although the $93.2 billion fiscal 2021 budget was adopted by the Legislature on March 19, it hasn't been sent to the governor for final action. It doesn't address the potential decline in revenue or anticipated expenses because of COVID-19.
The spending plan sets aside $300 million to respond to the disease and it leaves the state with $3.9 billion in reserves. The fiscal year starts July 1.
Florida also was allotted $4.6 billion in the CARES Act to defray pandemic-related costs.
Budget amendments to the current fiscal year spending plan as a result of efforts to address COVID-19 totaled $526.3 million through April 10, the latest information available.
Florida has seen 52,634 positive cases of COVID-19, and 2,319 deaths from the disease, according to the state health department.