Coronavirus continues to ravage state revenue

State tax revenues showed little improvement in May as the  economy continued to suffer heavy damage from the coronavirus pandemic, a new report shows.

The monthly revenue report from the Legislature’s Office of Economic & Demographic Research said the state’s net tax revenue during May fell $779.6 million below an earlier forecast.

That followed April revenue being off $878.1 million, as Florida businesses shut down or dramatically scaled back to slow the spread of COVID-19, the respiratory disease caused by the coronavirus.

“The presence of coronavirus in Florida presented its most serious threat to the sales tax forecast, especially to those taxes collected from tourists,” said the May report, released last Thursday. “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 biggest hit was to sales tax collections, which were down $695.4 million, or 31.7 percent, from the forecast amount.

“A large part of this loss is attributed to declines in the tourism and hospitality-related industries, but the impact was widespread as all categories other than building-related industries were affected,” the report said.

Senate President Bill Galvano, has been pressing for patience from his colleagues as the state goes through financial recovery.
Photo special to the Outlook

Because the state had seen a $202.4 million increase in revenue compared to forecasts in the first three months of the year, the overall loss stood at $1.45 billion through May.

The report was released as Gov. Ron DeSantis is poised to slash hundreds of millions of dollars from the proposed $93.2 billion state budget for the fiscal year that started last Wednesday. Lawmakers passed the budget in March, as the economic effects of the coronavirus were starting to be felt.

It was unclear as of mid-day last Friday when DeSantis would sign the budget and issue vetoes. But he will have to act in the coming days.

While the new report reflects May tax numbers, the state has seen a surge of COVID-19 cases in June. DeSantis began an economic-reopening effort in May and expanded it into a second phase this month.

DeSantis said last Thursday that as positive cases increase, the state isn’t ready to enter a third phase of the reopening.

“Obviously, we want this to end as soon as possible,” DeSantis said last Thursday during a bill-signing event in Tampa. “If I honestly thought it would end tomorrow, I would do cartwheels and I would tell people that.”

While Democrats have called for a special legislative session to address the fiscal impacts of the respiratory virus, DeSantis has said his goal is to make enough line-item vetoes to prevent the need for lawmakers to return to Tallahassee before the November General Election.

Senate President Bill Galvano, R-Bradenton, continued last Friday to press for patience from his colleagues.

In a memo to senators, Galvano said he maintains a “certain level of cautious optimism” based on “sound financial decisions over the past decade,” federal stimulus dollars, reserves of $4 billion set aside for the upcoming fiscal year and DeSantis’ expected vetoes.

“Significant line item vetoes by Gov. DeSantis, which we are all anticipating, will not only further buffer our working capital reserves, but could also enhance our trust funds, creating more flexibility for the Legislature to prepare the fiscal year 2021-22 budget next session,” Galvano wrote in the memo.

However, Galvano acknowledged, “the fact remains that myriad impacts of the coronavirus on our constituents and our economy have changed the budget landscape considerably since we passed our budget in late March.”

But Florida Democratic Party Chairwoman Terrie Rizzo blasted Republicans over their handling of the state finances.

“Democratic legislators have been calling for a special session to address the damage the coronavirus pandemic has caused our state, but Republicans have blocked it because they’re too scared to make tough decisions in an election year,” Rizzo said. “Republicans have slow walked addressing these issues because they know they’re not on the side of Florida’s workers, but I hope the May report lights a fire under them to finally do the right thing and get back to work for the voters who elected them.”

The first phase of DeSantis’ economic reopening plan began May 4, with restaurants and retail stores outside of Miami-Dade, Broward and Palm Beach counties allowed to operate with outdoor seating and 25 percent indoor capacity. The phase let hospitals and doctors resume providing elective medical procedures. Later, the occupancy limit was bumped to 50 percent, gyms, barber shops and hair salons were allowed to open, and the South Florida counties — which have been virus hotspots — were able to take part. The second phase of the plan got underway a month later.

State net revenues for May had initially been forecast at more than $2.956 billion, but came in at about $2.177 billion, according to the report.

In April, the projection was $2.984 billion, with the actual monthly number at $2.106 billion.

Three revenue sources — corporate income taxes, highway safety fees and corporate filing fees — collectively came in $125.8 million below estimates in May after being down $323.1 million in April. However, the state has allowed payments to be deferred, and economists expect some of those April and May declines to be recaptured in June or early in the new fiscal year.