TALLAHASSEE -- Don’t feel bad if you don’t know how the sequester will affect your wallet. Apparently, Florida’s top economists don’t either.
On Friday, state economists halted a budget meeting so they could adjust their forecast on sales tax collections, the state’s main source of general revenue. The problem, they said, is the across-the-board federal government spending cuts that went into effect on March 1.
Any modest improvement to the state budget picture “could be more than offset by the potential significant impact caused by sequestration,” Senate President Don Gaetz, R-Niceville, said Friday. “This uncertainty, caused by a lack of leadership in Washington, highlights Florida’s need to plan ahead, be cautious and to maintain adequate reserves.”
The budget forecast is no small thing. It serves as the basis for the $74 billion state spending plan.
If the forecast is optimistic, lawmakers could set aside money for pay raises and projects such as stadium renovations for the Miami Dolphins. If the forecast is negative, that wiggle room shrinks.
Economists were prepared to deliver good news, if not for the sequester. Housing construction and jobs are up; so are auto sales and consumer spending — all encouraging signs.
But in earlier forecasts, economists downplayed the possibility that the sequester would get this far or that a 2 percent payroll tax was going to be restored in January.
Now economists fret that they may have overplayed their hand.
“We need to do something to recognize that something is going on,” said Jose Diez-Arguelles, staff director for the Senate’s Finance and Taxation Committee, referring to the sequester. “It will take money out of the Florida economy, unemployment compensation will suffer, defense contractors will suffer, people will be put on furloughs. Anecdotally, people are already hurting, and we’re not really reflecting that.”
Chief state economist Amy Baker and other economists agreed that the state should lower its sales tax outlook, despite strong February collections, and Gaetz said future revisions might be necessary.
When the economists reconvened the meeting nearly nine hours later, they estimated an additional $257 million in new revenue from December. It would have been more without the sequester, Baker said. Still, add it all together and Florida now has a surplus of about $3.5 billion, though much of that lawmakers like to stash in reserves.
Just how the sequester translates into dollars and cents will become clearer next week, when the House and Senate begin to release their budget numbers.
Already, it’s clear that the sequester will have major ramifications for education.
Florida economists were hoping to have $86 million in the Public Education Capital Outlay, or PECO, fund. The dollars are generated from the state’s Gross Receipts Tax on electric, cable and land-line telephone bills.
As a result of the federal spending cuts, however, Florida lost a federal subsidy that was helping pay down certain bonds. Additionally, the state Department of Education wants to build a reserve account to service existing debts.
“That would use up all the cash,” Baker said.
She added: “For new purposes, they are going to have zero dollars available.”
That’s troubling news for state colleges and universities, which were banking on the extra cash.
In his proposed budget, Gov. Rick Scott recommended giving $36.3 million in PECO funding to state colleges and $37.9 million to the state university system. Another $1.4 million would have gone to the Florida School for the Deaf and Blind.
Scott wanted all of the money to be spent on “critical” maintenance projects.
In years past, local school districts, charter schools and higher-education institutions all got a share of PECO dollars. But the fund has been drying up, largely because fewer Floridians have landline telephones.