Revenue Estimates Up Amid Uncertainty

By Jim Turner, The Florida News Service

With economic uncertainty “elevated,” state economists Friday increased general-revenue tax projections that lawmakers will use in crafting a state budget for the upcoming year.

A panel of economists known as the Revenue Estimating Conference added a combined $572.5 million to projections made in August for the current 2025-2026 fiscal year and the 2026-2027 fiscal year.

That included increasing the 2025-2026 projection by $502.5 million and the 2026-2027 projection by $70 million.

Amy Baker, coordinator of the Legislature’s Office of Economic & Demographic Research, said the economy, more nationally than in Florida, is entering a period “where things are not quite as clear.”

In an executive summary of its report, the panel said there is a “continued deceleration in construction and real estate as well as slowing in tourism growth. Even though some economic disturbance is still evident with downward pressure on household savings, the elevated use of credit and continuing inflationary pressure, the forecasting environment is generally stable. That said, uncertainty about the economic outlook remains elevated from this point forward.”

Baker pointed to the effects of tariffs, particularly in areas such as corporate-income tax revenue.

“On corporate income tax, which was one of our biggest adjustments, we don’t know who’s going to end up paying the cost of tariffs,” Baker said. “Will corporations eat that and take it out of their profits, or will they fully pass it on to the purchaser? Or, is it going to be some combination of the two? So, that added a lot of uncertainty on what to do with corporate income tax receipts going forward into the forecast.”

The House and Senate are expected to introduce preliminary budgets in the coming weeks and then will negotiate a final spending plan for the fiscal year that will start July 1. General revenue is closely watched because it is a major source of money for schools, health programs and prisons.

The new estimates got a boost from sales-tax revenue, which accounts for about three-quarters of general revenue. The economists increased the sales-tax revenue forecast by $584.5 million for the current year and $226.8 million for the 2026-2027 year.

Also, projections of state earnings on investments were increased by $114 million for the current fiscal year and $29.3 million for the 2026-2027 year.

But Baker said uncertainty about how the Federal Reserve will handle interest rates clouds the forecast for earnings on investments.

“What is the Fed going to do with interest rate reductions going forward?” Baker said. “Where will they be able to take them? Will they have to delay them? Will they feel like they need to move faster on them? So, all of those scenarios have repercussions … that are not as clear now as they were in the summer.”

The increases in projected revenues from sales taxes and investments were partially offset by reductions in estimates of corporate-income tax revenues. Those estimates were reduced Friday by $401.3 million for the current fiscal year and $404.2 million for 2026-2027.

The last time economists updated projections in August, they increased general-revenue estimates for the current fiscal year by $246.8 million and by $252 million for 2026-2027.