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Revenue Estimating

Revenue Estimating. Bob McKee Chief Economist Florida Department of Revenue. Topics Discussed. Consensus Estimating Conference Process Revenue Estimating Conferences Impact Conferences Development of Local Government Revenue Estimates. Consensus Estimating Conference Process.

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Revenue Estimating

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  1. Revenue Estimating Bob McKee Chief Economist Florida Department of Revenue

  2. Topics Discussed • Consensus Estimating Conference Process • Revenue Estimating Conferences • Impact Conferences • Development of Local Government Revenue Estimates

  3. Consensus Estimating Conference Process • Established in Florida Statutes • Sections 216.133 to 216.138, Florida Statutes • Conference Consists of Principals and Participants • Four Principals. The Principals are professional staff of: • Governor’s Office • Florida House of Representatives • Florida Senate • Coordinator of the Office of Economic and Demographic Research • Participants – any person invited to participate in the Consensus Estimating Conference by a principal • DOR is a participant

  4. Consensus Estimating Conference Process • Consensus means unanimous consent of the Principals. • Results of the conferences are official information and are to be used by each state agency and the judicial branch in carrying out their duties under the state planning and budgeting system. • All sessions and meetings of a consensus estimating conference are open to the public. • Process allows for a consistent set of numbers to be used in the development of budget and policy.

  5. Conferences • Economic Estimating Conference • Demographic Estimating Conference • Revenue Estimating Conference • Education Estimating Conference • Criminal Justice Estimating Conference • Occupational Forecasting Conference • Early Learning Programs Estimating Conference • Self-Insurance Estimating Conference • Florida Retirement System • Actuarial Assumption Conference • Social Services Estimating Conference

  6. Economic and Demographic Conferences • Economic Conferences • National Economic Estimating Conference • Florida Economic Estimating Conference • Demographic Conference • The results of these conferences are to be used by all other consensus estimating conferences in developing official information.

  7. Revenue Estimating Conferences • Ad Valorem • Article V Fees and Transfers • Documentary Stamp Tax • General Revenue • Gross Receipts/Communication Services Tax • Highway Safety Fees • Impact • Indian Gaming • Long Term Revenue Analysis • Lottery • Monthly Revenue Estimates • Public Education Capital Outlay • Slot Machines • Tobacco Settlement • Tobacco Tax and Surcharge • Transportation Revenue • Unclaimed Property / State School Trust Fund Note – Underlined conferences indicate those conferences for which DOR is a participant

  8. Revenue Estimating Conferences • Multiple forecasts presented for Principals to consider • Typically there are three forecasts considered • Each forecast uses the same economic and demographic inputs • Florida Demographic Conference • National Economic Conference • Florida Economic Conference • Example – Ad Valorem Estimating Conference • Forecast presented by Executive Office of the Governor, Office of Economic and Demographic Research, and Department of Revenue

  9. Sessions of the Consensus Estimating Conferences • Governor’s Budget Preparation (Fall) • Legislative Budget Deliberation (Spring) • Long Range Financial Outlook Development (Summer) • Special Impact Conferences – to develop official information which reflects specific changes or proposed changes relating to the area of responsibility of the conference

  10. Special Impact Conferences • Review proposed changes to Florida Statutes that have potential revenue implications. • Starting point of analysis is current law, current administration to develop baseline against which impact of change is measured. • Generally meets weekly during session. • Considers both state and local revenue impacts. • Addresses revenue impacts only, as opposed to costs or expenditures: • For the 2013 Legislative Session, there were 22 Impact conferences held and 181 legislative proposals analyzed.

  11. Consensus Estimating Conference Results and Workpapers • The results and the supporting workpapers of the various conferences are available online at the website of the Office of Economic and Demographic Research • www.edr.state.fl.us • Conference archives available online from Regular Session 2000 forward • Varies depending upon conference

  12. Local Government Revenue Estimates • Motor Fuel • Constitutional Fuel Tax • County Fuel Tax • Local Option Fuel taxes • First 1 through 6 cents • Ninth Cent • Second 1 through 5 • State Shared Revenues • Half Cent Sales Tax • Ordinary Distribution • Emergency Distribution • County Revenue Sharing • Municipal Revenue Sharing • Fiscally Constrained Counties Distribution

  13. Local Government Revenue Estimates • Local Option Sales Surtaxes • Local Communication Services Tax • Taxable Sales of Transient Rental Facilities • Used to forecast Convention and Tourist Development Tax Receipts

  14. Timing to Produce Local Government Revenue Estimates • In order to produce local government revenue estimates, the Office of Tax Research must have: • Completed Measures Affecting Revenues Report for Legislative Session • Measures Affecting Revenue Report includes the impact of all legislation that passed in the session. • Spring Revenue Estimate • Population estimate including changes due to annexations and incorporations

  15. Local Revenue Estimates • Statewide Revenue Estimates are starting point • Must convert from State Fiscal Year to local fiscal year for most sources • Motor Fuel estimates – Statewide forecast for gallons • Sales tax related revenue sources – Statewide Sales Tax Forecast • Local Communication Services Tax – Estimate of statewide local option • Transient Rentals – Historic data on collections related to transient rentals • No statewide forecast

  16. Estimating Motor Fuel Taxes • Motor Fuel • Formula based • Constitutional Fuel Tax • County Fuel Tax • Activity Based • Local Option Fuel taxes • First 1 through 6 cents • Ninth Cent • Second 1 through 5

  17. Estimating Motor Fuel TaxesConstitutional and County Fuel Taxes • Statewide forecast of Gallons for Motor Fuel and Diesel Fuel • 2 cents per gallon for Constitutional Fuel Tax • 1 cent per gallon for County Fuel tax • Both Constitutional and County Fuel Tax use same distribution formula • Three part formula • Tax from county based on certified gallons

  18. Estimating Local Option Fuel Taxes • Inputs • Statewide forecast for Motor Fuel • Statewide forecast for Diesel Fuel • Local rate adopted • Historic Certified Gallons by County • Population Growth • Local distribution percentages • Established either by interlocal agreement or default formula • Special treatment for Diesel Fuel • Diesel is imposed statewide for the first 1-6 local option and the ninth cent local option • The second 1-5 local option does not apply to diesel

  19. Estimating County Revenue Sharing • Inputs • Forecast of State Sales Tax ( 97.9% of funds) • Forecast of Cigarette Tax (2.1% of funds) • Population Estimates • Unincorporated and Countywide • Prior year sales tax collections by county • Formula – Distribution percentage for each county is:

  20. Estimating County Revenue SharingGuaranteed Entitlements and Growth Revenues • Two Guarantees • First Guarantee • Amount received in State Fiscal Year 1971-72 • Second Guarantee • Amount received in State Fiscal Year 1981-82 • Growth Money – Revenues available, if any, after first and second guarantees are met • Special Distribution for Consolidated County • $6.24 x County Population • Reduces funds available before distribution percentages applied.

  21. County Revenue SharingSteps in Calculating Distributions • Step 1 - Calculate Amount based on distribution formula. • Step 2 - Compare distribution amount to First Guarantee amount to ensure Guarantee is met. • Step 3 - If First Guarantee is met, compare distribution amount to sum of first and second Guarantee. • Step 4 - If either First or Second Guarantee is not met for any county, subsequent funds are reduced to allow for the Guarantees to be met. • Step 5 - Calculate available growth money. Growth money is funds available after Guarantees are met. County Revenue Sharing has historically had sufficient funds to meet the First and Second Guarantee for all counties, thus resulting in all counties receiving the amount from the distribution formula.

  22. Municipal Revenue Sharing • Inputs • Statewide Sales Tax (73.37% of Funds) • Statewide Estimate for Municipal Fuel Tax on Motor Fuel (26.61% of Funds) • Statewide Estimate of Alternative Fuel User Decal Fee (.02% of Funds) • Population Estimates – Municipal and County • Sales Tax Collections – County Level • Municipal Taxable Value of Real and Personal Property • Guaranteed Entitlement • Prior Year Local Government Half Cent Distribution

  23. Municipal Revenue Sharing Formula = Each of these terms have substantial sub-calculations. These are not discussed further in this presentation.

  24. Steps in Calculating Municipal Revenue Sharing • Step 1 – Determine statewide amount available. • Step 2 – Determine the Apportionment Factor for each municipality. • Step 3 - Calculate distribution amount based on apportionment factors for each city, including new cities. • Step 4 - Compare Formula Amount to Guaranteed Amount. • If Guaranteed Amount exceeds Formula Amount, municipality receives Guaranteed Amount. • Step 5 – Compare Formula Amount to amount received in 1999-2000, if Formula Amount is less than amount received in 1999-2000, municipality receives amount received in 1999-2000. • Step 6 – If funds are remaining, a growth distribution is calculated for eligible municipalities.

  25. Steps in Calculating Municipal Revenue Sharing • Step 7 – Calculate Section 218.245(3) Distribution • Replacement funds for reduced Local Government Half Cent Revenue Sharing Funds (2003) • Step 8 – Sum Distributions to get total by Municipality • Unlike County Revenue Sharing, there are cities that do not receive growth money due to Steps 4 and 5. • This also means there are cities that receive less than their formula amount.

  26. Local Government Half Cent Revenue Sharing Program • Inputs • Statewide Sales Tax Forecast • Historic Sales Tax Collections by County • Population Estimates • Municipal • Unincorporated area • Countywide

  27. Local Government Half Cent Revenue Sharing Program • Step 1 – Forecast state sales tax by county. • Step 2 – Determine amount to be distributed to local government entities by county. • Step 3 – Determine split between cities and counties using statutory formula. • Step 4 - Determine Emergency Distribution amount and distribution. (Not discussed in Presentation) • Step 5 - Determine Supplemental Distribution amount and distribution. (Not discussed in Presentation)

  28. Half Cent – Municipal Share • Municipal Formula for any given city. The result is applied to the total half cent from activity that took place in the county.

  29. Half Cent – County Share • County Formula for any given county. The result is applied to the total half cent from activity that took place in the county.

  30. Local Option Sales Surtaxes • Inputs • Estimate of Sales Tax Collections by County (from Half Cent Estimate) • Historic differences between half cent collections and local option sales tax collections by county • Used to estimate impact of $5,000 cap • Default Formula (same as half cent formula) • Interlocal Agreements (if any)

  31. Local Option Sales Taxes • Step 1 – Take Estimate of Sales Tax Collections at county level used in Half Cent Estimate. • Step 2 – Calculate implied Sales Tax Base. • Step 3 – Calculate impact of $5000 cap at county level. • Step 4 – Calculate countywide total for a hypothetical 1% levy. • Step 5 – Apply default formula percentages for cities and counties. The default is the distribution percentages calculated for the half cent. • Step 6 – Calculate Interlocal agreement percentage, if applicable. Please note – the Department calculates these based on how the interlocalagreement directs us to distribute the funds.

  32. Local Option Sales Taxes • Things to consider • The estimate is produced based on a hypothetical 1% levy. If your county has a local option sales tax different than 1%, the estimate can be scaled accordingly. • The estimate for distribution between cities and counties is based on the half cent formula. Not all authorized sales surtaxes require the proceeds be shared with cities. Be certain that the surcharge in place in your county is shared before relying on these estimates. • The amount reported as the interlocalagreement percentages is based on how the interlocalagreement directs the Department to distribute the funds. • In certain counties, the interlocal agreement directs DOR to distribute 100% to the Board of County Commissioners (or the County Clerk), who then further distributes to the various entities that receive distributions.

  33. Local Communication Services Tax (CST) • Inputs • Forecast for statewide Local CST • Historic CST Collections by Jurisdiction • Historic CST Local Rates • Population • Municipal • Unincorporated Areas • Audit Adjustments • Current CST Rate

  34. Local Communication Services Tax (CST) • Step 1 – Calculate Historic CST Tax Base by Jurisdiction • Step 2 – Calculate Historic CST Base per capita • Step 3 – Estimate CST Base per capita for forecast period • Step 4 – Apply current local rates to calculate estimated local tax revenues • Step 5 – Layer on known audit adjustments for past and coming periods

  35. Local Communication Services Tax (CST) • Notes on CST • Only local tax forecast at the municipal level. All other local sources are forecast at the county or statewide level and distributed to various jurisdictions by formula. • Estimate does not include revenues from Local Discretionary Surtax conversion rates. • Estimate does not include revenues from CST on Direct to Home Satellite that are distributed back to local governments through the Half Cent Revenue Sharing Program or the Fiscally Constrained County Distribution.

  36. Transient Rentals • Tax Base for Tourist and Convention Development taxes • Estimate is of Tax Base rather than Tax Collections • Steps in Estimating • Step 1 – Identify historic tax revenues by county from Transient Rental Activity • Step 2 – Convert to Tax Base by dividing by local tax rate • Step 3 – Apply forecast growth rate for Tourism and Recreation category from General Revenue Estimating Conference • Step 4 – Allocate growth to county level based on historic growth

  37. Questions? • Contact information Bob McKee Chief Economist Office of Tax Research Florida Department of Revenue (850) 717-6159 mckeebob@dor.state.fl.us

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