Florida sales tax revenue plunges
Collections down by more than $750M, early reports show
Florida sales tax collections from March are as much as $770 million below estimates for the month, according to preliminary revenue reports obtained by the Orlando Sentinel.
That’s about 25 percent less than the state expected to raise in sales tax revenue for the month, according to the reports.
April collections are expected to be worse: Walt Disney World didn’t shut down until halfway through March, for instance, and Florida Gov. Ron DeSantis didn’t issue a statewide shelter-in-place order until the beginning of April.
The March sales tax figures, which are based on daily collection reports issued by the Florida Department of Revenue, aren’t official yet and the final size of the monthly shortfall will change. Most businesses had to turn in the sales taxes they collected from customers in March by the end of April, but some payments will continue to trickle in and other adjustments could be made over the next several days.
All 100 of the state’s biggest tax-collecting businesses have turned in their sales taxes from March, according to the Florida Department of Revenue.
“We are still reviewing the top 500 taxpayers to determine how many have filed a return,” said Bethany Wester, an agency spokeswoman. “We are also still processing checks that were postmarked by the due date, so the total will change but we can’t predict by how much. That information will not become clear for several days.”
But the daily collection reports provide the first detailed look at how badly the state’s finances are being battered by the coronavirus pandemic and the economic shutdown the virus has forced.
Sales taxes are — by far — the most important source of state revenue in Florida, which does not levy a personal income tax and has an easy-to-avoid corporate income tax. Sales taxes account for nearly 80 percent of general revenue, the unrestricted pot of money at the heart of the state budget that is spent mostly on education and health care.
That means when people stop traveling and spending, the state’s finances collapse.
Rep. Travis Cummings, a Fleming Island Republican and the House’s top budget writer, said it’s still too early to tell if the losses will be significant enough to require an emergency session in which lawmakers cut spending, raise taxes or do some combination to compensate for the revenue shortfall.
“I don’t know that anything in there surprised us,” Cummings said. “Whether it’s $600 million or $800 million or $900 million, not to say that’s insignificant but we feel our current fiscal situation, as well as some help we think will come down from the feds, will continue to assist us.”
Between the state’s various reserve funds and extra Medicaid funding approved by Congress in an early pandemic response, Florida has roughly $4 billion to absorb shortfalls from March through June 30, the end of the state’s current fiscal year.
But if Florida’s reserves are heavily depleted, that’s fewer carryover funds to apply to the next budget year, which begins July 1. And if the economy is slow to rebound from the coronavirus depths, tax collections could continue to lag through the summer and into the fall.
What’s more, one of the main safety nets that lawmakers are hoping will help soften the blow may not provide as much of a cushion as they hope.
In recent weeks, Florida has deposited approximately $5.9 billion into the state treasury from a $150 billion fund to help state, local and Native American governments as part of the “CARES Act,” the mammoth economic rescue package that Congress passed at the end of March.
Congress imposed some conditions on how states must use the aid but left room for interpretation. Florida leaders were hoping to use the extra money to plaster over the sudden hole now opening up in the state budget — and to avoid recession-worsening austerity measures like laying off state workers or refusing to fill vacant jobs.
There’s one problem: The Trump administration, which is administering the state relief fund, says that’s not allowed.
“Funds may not be used to fill shortfalls in government revenue to cover expenditures that would not otherwise qualify under the statute,” the Treasury Department announced in guidance issued last month. “Although a broad range of uses is allowed, revenue replacement is not a permissible use of Fund payments.”
Both Cummings and Senate President Bill Galvano, R-Bradenton, say they hope the feds will relent on that restriction.
“The revenue losses, whether it’s local government, state government — we’re hopeful that the feds continue to evaluate that,” Cummings said. “If that occurs, I’m not saying all our issues are resolved, I’m not saying we’re out of the woods yet, but that would go a long way in dealing with these losses.”
Some Republican lawmakers in Congress, who have been critical of what they say are some bloated local government bureaucracies, have praised the Trump administration’s decision.
“This funding should not be used to backfill state budgets or cover revenue shortfalls,” said Sarah Schwirian, a spokeswoman for U.S. Sen. Rick Scott.
The restriction has enraged Democratic lawmakers who say the administration is attempting to starve cities and states in order to force policy goals like privatization and retirement benefit cuts. They say the administration has prioritized helping hotels, banks and restaurants over health departments, public schools and police departments.
“For an administration that rabidly guts needed regulations to suddenly create an administrative barricade where it was specifically not intended is cruel and hypocritical,” U.S. Rep. Debbie Wasserman Schultz, D-Fla., said in a statement.
In Tallahassee, Cummings also said the Legislature is reviewing whether it will have to convene a special session to disburse part of the CARES Act funds meant for local governments.
Cities and counties with populations of more than 500,000 can receive direct payments from the federal government, but that means those with populations under that threshold must receive disbursements from the state, and only the Legislature has the power to appropriate funds from the state treasury. Out of Florida’s 67 counties, only 12 are eligible for direct payments — Brevard, Broward, Duval, Hillsborough, Lee, MiamiDade, Orange, Palm Beach, Pasco, Pinellas, Polk and Volusia.