Florida Governor Cuts $1 Billion From Budget After Revenue Hit
(Bloomberg) -- Florida Governor Ron DeSantis used his veto power over the budget to cut about $1 billion of spending as a surging coronavirus outbreak deals a blow to the government’s tax collections.
The move to roll back the $93.2 billion budget enacted by the legislature in March shows the fiscal pressure the state is facing after business shutdowns designed to slow the virus’ spread wreaked havoc on the state’s sales-tax dominated economy. With the state now an epicenter of the outbreak, the Republican governor has forced bars to shut down, promising a fresh hit to tax collections.
“Nobody has ever made more vetoes than I have right here,” DeSantis said, citing the “difficult circumstances.”
Florida is among states nationwide that are facing what may be the gravest financial crisis in decades as the surge in unemployment and business closures decimates their revenue.
Florida has taken a big economic hit because it gets nearly 70% of its revenue from sales taxes, according to financial statements. In May and April, the state’s revenue fell short of forecasts by $1.7 billion, according to a June 26 report from the Legislature’s Office of Economic & Demographic Research.
Among the programs cut were money allocated to a job growth grant fund and a courthouse project in Pinellas County, the governor said. The budget includes $500 million for teacher raises and a 3% raise for all state employees plus allocations to affordable housing and environmental projects.
Florida is more exposed to the impacts of the pandemic in part because of its reliance on tourism, said Jared Walczak, vice president of state projects with the Center for State Tax Policy at the Tax Foundation. Florida doesn’t levy a personal income tax.
That leaves it vulnerable in an economic downturn when consumers and travelers spend less.
“It may prove in many states, income taxes and sales taxes decline in tandem, but in Florida when the sales tax is designed around tourism, the impact will be more severe,” Walczak said.
Florida was one of the least prepared for a recession, according to a Moody’s Analytics analysis of all 50 states in April. In their baseline scenario, the state is expected to see a general-fund revenue shortfall of about 20% when factoring in the state’s rainy-day fund, with the loss potentially more during an extreme scenario.
DeSantis said that the state has $6.3 billion in reserves that Florida may need to tap to absorb the revenue losses caused by the pandemic. He said he would support another federal stimulus plan to help with the lost revenue, but not to finance any problems that his state or others had prior to the outbreak.
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