Assessing the Impact of Revenue
Limits on Florida Local
Governments
Robert J. Eger III
Florida State University
August 19, 2010
LeRoy Collins Institute ~ Carol Weissert, Ph. D., Director
FSU Campus ~ 506 W Pensacola Street Tallahassee FL 32306-1601
850-644-1441 ~ 850-644-1442 fax
Focus of Today’s Presentation
• Senate Joint Resolutions [SJR1906 (2009) &
SJR2420 (2010)] – “Revenue Limits”
“The creation of a new section in Article VII of
the State Constitution to limit state and local
government revenues and require voter approval
of new taxes and fees.”
Background
• Constitutional Amendments - Specific to Ad
Valorem Tax
• Amendment 10 - Save our Homes (Implemented FY
1995)
• Amendment 1 (Implemented FY 2008)
• Florida Statute 129 - Balanced Budget
• Effect is Limit on Revenues = Limit on Expenditures
• Florida Statute 200.186 - Millage Rate Limits
• Effect is limit on millage rate based on calculated
rolled-back rate and adjusted for growth in per capita
personal income
Setting for Revenue Limits
• Proposed “Revenue Limits” Amendment
• Baseline Revenues = FY2011
• Revenue Sources Effected
•
•
•
•
•
•
•
All Taxes
Fees
Assessments
Licenses
Fines
Non-Federal Intergovernmental Funds
Charges for Services
• Bond Revenue
• Annual debt service reduces revenue limit dollar for
dollar
5
Proposed Formula for Growth
• Growth = CPI-UC + State Population Change
▫ CPI-UC = CPI for urban wage earners in the South
region and clerical workers
▫ State Population Change = % change in state
population annually
6
Alternative Growth Formulas
• Growth = CPI-UC + State Per Capita Income
Change
▫ Potential effect is reducing adverse effects of
growth due to location wealth
• Growth = CPI-UC + Pop Change (County)
▫ Potential effect is allowing local population impact
7
Estimating Revenue
• Use 1979-2008 revenues (LCIR & DFS)
▫ Estimate 2011 revenue
• Estimate 2009-2011 (BLS, BEA, and EDR)
▫ CPI-UC
▫ Population change for state & county
▫ State income change
• Compare with 2009 actual pop change and state
income change
• Compare with 2009 and Jan. 2010-June 2010 actual
CPI-UC
8
0
.05
.1
.15
Historic CPI-UC 1980-2008
1980
1990
2000
2010
year
CPI for Urban & Clerical Wages
CPI-UC 3-Year Moving Average
9
0
.05
.1
.15
Historic Per Capita Income Change 1980-2008
1980
1990
2000
2010
year
Annual Change in Per Capita Income
2-Year Moving Average
10
Bottom Line - FY2011 Base Revenue
• CPI-UC
▫ 2009 – Actual = -0.9%
▫ 2010 – Est. = 2.9%
▫ 2011 – Est. = 2.1%
• State Income Growth
▫ 2009 – Actual = -3.3%
▫ 2010 – Est. = -0.3%
▫ 2011 – Est. = -0.1%
• Population Change – Average County
▫ 2009 – Est. = 2.2%
▫ 2010 – Est. = 0.7%
▫ 2011 – Est. = 0. 7%
11
Forecasting Baseline FY2011
County Revenues
12
Baseline County Revenue for FY2011
“Proposed Bill” Estimate
Alternative Estimate
Uses growth = CPI-UC + State
Population Change
Uses Growth = CPI-UC + State
Per Capita Income Change
Outcomes
▫ Explains 90% + of the
variance over time for
55/66 counties (Duval
excluded)
Outcomes
▫ Explains 90% + of the
variance over time for
55/66 counties (Duval
excluded)
▫ Average revenue will
increase between FY2008
and FY2011 by 8.76%.
▫ Average revenue will
increase between FY2008
and FY2011 by 2.27%.
Gulf
-4.00%
-14.00%
-44.00%
6.00%
-24.00%
Hamilton
Glades
-34.00%
Monroe
Suwannee
Nassau
Lafayette
Liberty
Washington
Baseline FY2011 Revenue Compared to Actual FY2008
Revenue
Sumter
36.00%
Saint Johns
Jackson
Sarasota
26.00%
Gadsden
Levy
Palm Beach
Charlotte
Miami-Dade
Hardee
Flagler
Highlands
Leon
Citrus
Seminole
Orange
Okeechobee
Collier
Gilchrist
Wakulla
Brevard
Saint Lucie
Hendry
Manatee
Holmes
Polk
Volusia
Marion
Hillsborough
Martin
Pasco
Baker
Alachua
Bradford
Okaloosa
Indian River
De Soto
Franklin
Bay
Walton
Clay
Santa Rosa
Lake
Taylor
Escambia
Osceola
Columbia
Union
Jefferson
Lee
Hernando
16.00%
Broward
Pinellas
Dixie
Madison
Calhoun Putnam
13
Zero (0%) Growth
14
Model Quality- Counties
• Model quality is measured as greater than 84%
explained variance.
▫ The model can predict between 85-89% of revenue
variation over time for 11 counties.
 2 counties have a unincorporated/ total population
ratio below the average county (average is
69.56%)for FY2008
 11 counties are: Calhoun, Charlotte, DeSoto,
Gadsden*, Glades, Hamilton, Hardee*, Holmes,
Lafayette, Liberty, and Union
15
County Baseline Revenues Summary
• Using population and CPI-UC as indicators,
average forecasted county revenue for FY2011 is
$375,639,341 compared to average actual
FY2008 revenue of $345,383,727.
• Using State Income Change and CPI-UC as
indicators, average forecasted county revenue
for FY2011 is $ 353,223,938 compared to
average actual FY2008 revenue of
$345,383,727.
16
Forecasting Baseline FY2011 City
Revenues
17
Baseline City Revenue for FY2011
“Proposed Bill” Estimate
Alternative Estimate
Uses growth = CPI-UC + State
Population Change
Uses Growth = CPI-UC + State
Per Capita Income Change
Outcomes
▫ Explains 90% + of the
variance over time for
39/50 cities
Outcomes
▫ Explains 90% + of the
variance over time for
39/50 cities
▫ Average revenue will
increase between
FY2008 and FY2011 by
2.30%.
▫ Average revenue will
increase between FY2008
and FY2011 by 2.12%.
-46.00%
-66.00%
Fellsmere
14.00%
34.00%
Baseline FY2011 Revenue Compared to Actual FY2008
Revenue
South Bay
Coleman
Miami Lakes
Monticello
54.00%
Marco Island
Marathon
Key West
White Springs
Palatka
Rockledge
Alford
Lake Mary
Plant City
Melbourne
Holly Hill
Sanibel
DeBary
Mount Dora
Medley
Trenton
Golf
Tampa
Belleair Beach
Gulfport
West Melbourne
Lake Placid
Lauderhill
Defuniak Springs
Lake Helen
Gainesville
Pomona Park
-6.00%
Kissimmee
Daytona Beach Shores
-26.00%
Glen St Mary
18
Crystal River
Zero (0%) Growth
19
Model Quality- Cities
• Low quality Estimates
▫ Revenue estimation does not meet minimal threshold
for time period
 Where quality is measured as explained variance greater
than 84%
• Eleven (11) cities have low quality forecasted
revenue estimates for FY2011
▫ Bascom (pop. 111), Bay Lake (pop. 20), Cedar Key
(pop. 928), Fort Pierce (pop. 44,227), Greensboro
(pop. 634), Highland Park (pop. 248), Laurel Hill
(pop. 634), Live Oak (pop. 6,712), Montverde (pop.
1,196), Sopchoppy (pop. 424), Virginia Gardens (pop.
2,298).
20
City Baseline Revenue Summary
• Using population and CPI-UC as
indicators, average forecasted city revenue
for FY2011 is $23,330,045 compared
to average actual FY2008 revenue of
$ 22,805,518.
• Using State Income Change and CPI-UC as
indicators, average forecasted city revenue
for FY2011 is $ 23,288,995 compared
to average actual FY2008 revenue of
$ 22,805,518.
21
Overall Baseline Estimation Summary
• Overall, estimations and explained variance are very
close for cities using either proposed estimator.
• Overall, estimations and explained variance are
good for counties with the “Proposed Bill” estimator
providing a higher average FY20011 revenue.
• Consideration must be given to the lack of quality
with both estimators for cities.
22
Forecasting the Future Growth
Ceiling Based on the Proposed Bill
23
Estimating the Growth Ceiling
• Use both prior and current (2010) year data
• Data sources
▫ BEA
▫ BLS
▫ EDR
• Estimate CPI-UC, State Income Growth, and
Population Change
24
Estimates
• CPI-UC
▫
▫
▫
▫
2012 – Est. = 1.4%
2013 – Est. = 2.1%
2014 – Est. = 1.9%
2015 – Est. = 1.8%
• State Income Growth
▫
▫
▫
▫
2012 – Est. = 0.6%
2013 – Est. = 0.3%
2014 – Est. = 0.4%
2015 – Est. = 1.3%
• Population Change – Average County
▫
▫
▫
▫
2012 – Est. = 1.0%
2013 – Est. = 1.6%
2014 – Est. = 1.7%
2015 – Est. = 1.7%
25
Estimated Growth Ceiling Proposed Bill
• Proposed Bill
▫ Growth = CPI-UC + State Population Change
▫ Additive effect – (FY2012+FY2013+FY2014+FY2015)
= 12.79% growth
▫ Compounding effect – 13.41% growth
• Alternatives
▫ Growth = CPI-UC + State Per Capita Income Change
▫ Additive effect – 9.69%
▫ Compounding effect – 10.04%
▫ Growth = CPI-UC + Pop Change (County)
▫ Additive effect – 13.08%
▫ Compounding effect – 13.73%
26
Considerations
• We are estimating FY2011 revenues with error
• All estimates excluded capital funding
▫ Capital funding is very “lumpy”
▫ Is capital revenue really revenue?
▫ Legislation appears to be focused on operating
revenues
27
Considerations
• Estimates include State and Local
Intergovernmental Revenues
▫ This could possibly be the cause of some of the
variation of the estimators since some cities and
counties receive a larger proportion of revenue
from these sources.
▫ Consideration should be given to placing all
intergovernmental in the exempt category, not
just Federal intergovernmental revenues.
28
Possible Changes to Proposed Bill
“State revenues” means revenues to the General Revenue
Fund from taxes, fees, assessments, licenses, fines, and
charges for services imposed by the legislature or executive
branch agencies on individuals, businesses, or agencies
outside state government.
However, the term does not include: proceeds from the
issuance of bonds, proceeds from the state lottery returned
as prizes, receipts of the Florida Hurricane Catastrophe
Fund and Citizens Property Insurance Corporation or their
successor entities, tuition and fees charged to students by
public universities and community colleges, gifts,
intergovernmental funds, collections for another
government, pension contributions by employees and
pension fund earnings, budget stabilization fund transfers,
damage awards, and property sales.
29
Possible Changes to Proposed Bill
REVENUE RELATING TO BONDS. Revenues do
not include the proceeds from the issuance of
bonds. However, the debt service on bonds,
excluding bonds for capital projects, shall
decrease the revenue limit by the amount of the
annual debt service.
30
Possible Changes to Proposed Bill
“Rate of population change” means the percentage
change in the population of the state or county
as estimated by the United States Census Bureau
or the Bureau of Economic and Business
Research (BEBR) at the University of
Florida. The stated percentage shall be
established annually in the manner prescribed
by general law, and shall be based on a
comparison of the average of the Census Bureau
or BEBR estimates for the most recent two
consecutive calendar years.