TALLAHASSEE --- State economists on Wednesday increased general-revenue projections by a total of about $2 billion for the current fiscal year and next year, giving a boost to lawmakers as they start preparing to draw up a budget during the 2025 legislative session.
A panel of economists known as the Revenue Estimating Conference said about half of the projected increase is tied to anticipated earnings on historically high state investments receiving favorable interest rates.
But economist Amy Baker, coordinator of the Legislature’s Office of Economic & Demographic Research, said some economic uncertainty remains about consumer savings levels and global issues, such as conflicts in the Middle East that could have a spillover effect on oil and gas prices.
“We didn't dramatically change our outlook on anything,” Baker said. “We're fine-tuning our outlook. We're changing the timing on certain events happening. But out of a $50 billion general-revenue fund, we didn't materially reshape any part of that.”
The projections replaced estimates issued 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 demonstrate “Florida’s economy is healthy and growing.”
“While there are always some economic uncertainties, we are a little stronger now than we were earlier this year,” Passidomo wrote.
Passidomo said the new estimates will be incorporated into a long-range financial outlook that a joint legislative panel is expected to approve next month. She said that outlook also will reflect the end of three years of "higher, nonrecurring pandemic-era spending" fueled by federal money.
“We know the timeline to spend pandemic funds is coming to (an) end, and we will need to continue to make smart, fiscally-responsible adjustments to align our budget with post-pandemic level spending that is balanced and sustainable for the long term,” Passidomo wrote.
The economists added $934.3 million to revenue projections for the current fiscal year, which started July 1, and $1.1 billion for the 2025-2026 fiscal year.
Projected earnings on state investments were increased by $546.4 million for the current fiscal year and $478.1 million for the 2025-2026 fiscal year.
Estimates of sales taxes, which traditionally make up the largest source of general revenue, were increased by $504.7 million over the two-year period. Estimates of corporate-income taxes were increased by $462.5 million.
The forecast continues to project a “soft” landing for the economy. Last year, the economists removed the prospects of a “mild” recession that had been in earlier forecasts.
But the panel has long expressed concerns about the personal savings rate. Consumers socked away cash early in the COVID-19 pandemic, but the savings rate has dropped.
“Not everyone, but a significant number of people, have now run through any savings they've had,” Baker said. “They're starting to max out on their credit cards, and they still face prices that are still high, and we're not caught. We're not calling for disinflation anywhere in our forecast. So, they're being challenged. We're cognizant of that.”
On Wednesday, the U.S. Bureau of Labor Statistics posted a 2.9 percent year-over-year increase in the consumer price index, the smallest in more than three years. While grocery prices are up 1 percent from a year ago, housing costs continue to push upward, which remains a key issue in Florida.
The new inflation rate is expected to allow Fed officials to lower interest rates in September.