FLORIDA'S - Florida Department of Financial Services

WINTER EDITION 2017

F LORI DA’S

2017 ECONOMIC OUTLOOK

MISSION To provide a one-stop shop for the latest news and valuable insight on Florida's economy and financial health.

RESOURCES Chief Financial Officer Jeff Atwater is committed to making Florida more consumer and business friendly by ensuring consumer rights and protections, reducing regulatory burdens, and fighting fraud.

The Division of Consumer Services' Your Money Matters website offers a variety of financial tools, games, and resources about credit and debit, saving and spending, planning for live events and other topics.

http://www.myfloridacfo.com/Ymm/

Transparency ensures accountability, and Floridians can see how the money they send to their government is spent by viewing state budgets and contracts.

http://www.myfloridacfo.com/Transparency/

Consumer Helpline: 1-877-693-5236 The Division of Investigative & Forensic Services (DIFS) encompasses all law enforcement & forensic components of the Department. Report suspected insurance fraud to DIFS through our online referral application or by calling the Fraud Hotline (1-800-378-0445).

The Division of Consumer Services helps consumers make informed insurance and financial decisions. Our dedicated and experienced staff are trained in the 26 different categories of insurance. Consumer assistance and protection is our mission.

PARTNERS Florida’s Bottom Line is produced by the Florida Department of Financial Services (DFS) in association with:

For updates on Florida's economy, please visit www.MyFloridaCFO.com/FloridasBottomLine/

Letter from the CFO Dear Fellow Floridians: The beginning of a new year is an important time to reflect on what we have accomplished and what we want to achieve in the year ahead. Over the past year, Florida’s economy has seen profound growth in many areas and we’re entering 2017 well positioned to take advantage of these gains and continue to grow. Looking back on 2016, we see that Florida’s economy is on the right track: private sector job growth increased and outpaced the nation; the housing market continues to grow; and our unemployment rate has fallen to its lowest levels in eight years. This economic momentum sets the stage for Florida to continue its hard work throughout 2017. This edition of Florida’s Bottom Line is focused on the opportunities that lie ahead in the coming year as well as highlights of the progress that we have made in the past year. Inside, you will find an economic forecast and expert analysis on Florida from a leading economist, insightful outlooks on key emerging trends, commentary on what a new president may mean for Florida, and a look back on Florida’s economic achievements in 2016. As we embark on this New Year, it is important to acknowledge that Florida’s economic future will continue to be shaped by the hard work and perseverance of Floridians. It is your dedication that not only allows us to build upon our accomplishments, but reach new heights of economic success and prosperity.

INSIDE STORIES Florida's Economic Outlook SEE PAGE 1

Changing Federal Red Tape & Florida SEE PAGE 3

Paving the Path to Florida's Future SEE PAGE 5

I wish you and your family a Happy New Year.

Sincerely,

Jeff Atwater Chief Financial Officer State of Florida

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Florida's Business Rent Tax SEE PAGE 7

Infographic SEE BACK COVER

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JANUARY

FLORIDA'S ECONOMIC OUTLOOK By Sean Snaith

Director of UCF's Institute for Economic Competitiveness

1/9/2016

SOUTHWEST FLORIDA’S ECONOMY LOOKS STRONG Herald-Tribune

Florida’s economy enjoyed another solid year of growth in 2016. The latest job data for November showed that the Sunshine State added 263,900 jobs year-over-year, a 3.2 percent increase. The U.S. economy experienced job growth of 1.6 percent over the same time frame. This growth has been diversified with every industrial sector, with the exception of the Information sector, contributing to this job growth. The Information sector, home to traditional media companies including newspapers and other periodicals, continues to struggle with structural change in how information is gathered and disseminated faces declining print advertising revenue that is not being offset by rising online advertising.

1/11/2016

FLORIDA RANKED IN TOP 10 FOR BEST STATE ECONOMY Business Insider

Since November of 2010, Florida has created 1.27 million jobs and in 2017, the state is well poised to add to this total. Florida has managed this economic performance in the midst of a historically weak U.S. economic expansion. In the wake of a largely unexpected outcome of the Presidential election, the U.S. economic environment is poised to improve its performance and should transform from a headwind to a tailwind that will help Florida’s economy further expand.

Sean Snaith, Ph.D., is the director of the University of Central Florida’s Institute for Economic Competitiveness and a nationally recognized economist in the field of business and economic forecasting.

To the surprise of many, Donald Trump won the 2016 presidential election and will be the country’s 45th president when he is sworn into office in January 2017. What does a Trump administration mean for the economy in the U.S. and Florida?

1/29/2016

FLORIDA RANKED BEST STATE IN THE NATION TO RETIRE Wallet Hub

A definitive answer is not immediately available as many of the economic proposals laid out during the campaign remain short on particulars, however based on what we do know most of the proposed economic policies should boost economic growth in the U.S. and here in Florida as well. What are the major planks of President-elect Trump’s economic platform and what impact would they likely have on the economy? Tax reform proposals include a reduction of the number of income tax brackets. The plan would cap the level of deductions and the standard deduction would more than double, eliminating the need for many taxpayers to itemize reducing the burden of filing taxes for most taxpayers. Business taxes would also change substantially. Corporate income tax rates would fall from one of the highest in the world at 35 percent to 15 percent. To encourage investment, a

Jeff Atwater | Chief Financial Officer

Florida’s Bottom Line

1

lower 10 percent tax would be levied on the repatriation of profits that are held overseas by American companies who currently have $2.5 trillion in offshore tax havens. Other tax policies include allowing for full expensing of plant and equipment for U.S. based manufacturers and allowing small businesses to pay a 15 percent rate on business income instead of paying the personal tax rate on this pass-through income.

FEBRUARY

The incoming administration has proposed a $1 trillion dollar infrastructure investment program. The $1 trillion dollar infrastructure plan is nearly a tenfold increase in the level of infrastructure spending that was included in the American Reinvestment and Recovery Act of 2009. Coupled with tax reform this represents a double barreled fiscal stimulus. The roll-back of the regulatory morass that has flourished over the past two administrations by the Trump administration is, in my mind, potentially the most powerful of all the incoming President’s proposed economic policies. I have written extensively on the Affordable Care Act and the Dodd-Frank financial regulatory reform law and the adverse consequences of these laws for the economy. The policy uncertainty that we have created via Dodd-Frank, the Affordable Care Act, and thousands upon thousands of pages of new rules and regulations have weighed down this recovery. The promised repeal of many of these regulations will free the economy from the inundation of red tape that has entangled and hobbled economic growth.

2/4/2016

FLORIDA RANKED 5TH BEST POLICY ENVIRONMENT FOR ENTREPRENEURS AND SMALL BUSINESS Small Business & Entrepreneurship Council

The Trump administration’s stance toward international trade could be the Achilles’ heel of their economic platform. Strong statements, many directed toward China, toward enforcement of violations of existing trade agreements and alleged currency manipulation with tariffs and taxes, set the stage for retaliatory action by countries that were subjected to such penalties. The worst case scenario, an all-out trade war where the U.S. and its trading partners impose tariffs and other barriers to trade upon one another at such levels that international trade plummets. The devil is in the details and details are still scarce. But what we do know about the proposed economic policies of the Trump administration suggest that economic growth should be significantly higher. If a trade war can be avoided, and I think it ultimately will, Florida should reap the benefits of a stronger national economy. We have revised our economic outlook for Florida upward in the wake of the election and expect that real state GDP will expand at 3.8 percent in 2017, 1 percent faster than our projection for the national economy. Job growth in Florida will also continue to outpace the national economy and is expected to be near 3 percent in the upcoming year.

2/18/2016

FLORIDA CRACKED 100 MILLION TOURIST MARK IN 2015 Sunshine State News

MARCH

Strong population and job growth that will fuel an acceleration in housing starts in Florida in 2017 as the state remains in catch up mode in the housing sector. The domestic environment will become more conducive to economic growth in 2017, but a stronger dollar and a global economy that is peppered with potential pitfalls are significant risks on the economic horizon. All told, I am quite optimistic about the economic outlook for Florida’s economy. 2017 should be a good year.

3/4/2016

FLORIDA BASKS IN TEXAS-STYLE RESURGENCE Wall Street Journal

FOR MORE INFORMATION, PLEASE VISIT WWW.IEC.UCF.EDU Jeff Atwater | Chief Financial Officer

Florida’s Bottom Line 2

APRIL

4/13/2016

FLORIDA EARNED AN “A” IN FISCAL TRANSPARENCY U.S. PIRG

4/19/2016 STUDY: TAMPA AREA FOURTH FASTESTGROWING JOB MARKET IN U.S. Tampa Bay Times

MAY

CHANGING FEDERAL RED TAPE & FLORIDA By Patrick McLaughlin

Senior Research Fellow at the Mercatus Center

Regulations were a central theme of the 2016 election. While the new administration’s timeline for implementing regulatory changes remains unclear, the likelihood of any changes occurring in the administration’s first year largely depend on the legal mechanisms at its disposal. Many regulatory policies may be quickly abandoned with a stroke of the pen. A much larger number of regulations were produced by regulatory agencies through the regulatory process (often called the “notice-and-comment” process). Changes to such rules often require several years, with no guarantee of success. Congressional actions, ranging from repeals of specific rules to reform of the regulatory process itself, may also alter the regulatory landscape. So what can we reasonably expect in the first year?

5/4/2016

FLORIDA’S ECONOMY GROWS BEYOND TRADE AND TOURISM Sun Sentinel

Executive Orders

Patrick McLaughlin, Ph.D., is a Senior Research Fellow at the Mercatus Center.

Executive actions can quickly alter the regulatory landscape. A new administration typically issues an immediate “stopwork” order, directing agencies to temporarily freeze ongoing rulemakings for inventory and study. Historically, most of these are eventually restarted, although perhaps after modification or reprioritization. Executive orders (EOs) have become increasingly important to the regulatory landscape. The outgoing administration relied heavily on regulation by “phone and pen,” using EOs to implement changes that resemble regulations in all but name. Executive actions like EOs



circumvent the regulatory process, so the new administration could similarly use EOs to rescind those of the previous administration. Some orders may be revoked quickly, including one that increased the minimum wage for federal contractors, a secretarial order that suspended coal leasing on federal lands, and several EOs that relaxed immigration enforcement. For decades, EOs have required executive branch agencies to submit a benefit-cost analysis to OMB for review for some new rules. These requirements could be expanded to include independent agencies like the SEC and the CFTC. This would be particularly relevant to Florida—these agencies regulate important sectors of Florida’s economy, such as financial services (responsible for over 11 percent of Florida’s economic growth in recent years) and the commodity futures vital to Florida’s agriculture.

Rollback

Incoming administrations are fairly limited in their ability to rapidly change agency-issued regulations. To modify rules already in effect, administrations must have agencies go through another notice-and-comment rulemaking, a process typically taking a year or more. There are some exceptions—rules that were finalized but subsequently blocked by court injunctions. In some cases, if these rules remain unresolved, the new administration could effectively abandon them by dropping any further engagement. The Overtime Rule and the “Persuader” Rule may be in this group. The Clean Power Plan and the Waters of the United States rule are also in litigation, but those rules’ association with statutory mandates would make their complete abandonment more complicated.

MAY

5/9/2016

FLORIDA RANKED 2ND BEST STATE FOR BUSINESS Chief Executive Magazine

JUNE

Congressional Action

Regulation will be a priority for the Congress too. Congress may immediately use the Congressional Review Act (CRA) to repeal recently finalized regulations with simple majority votes, although its use will likely be limited. The CRA requires up to ten hours of floor time for each rule considered—time that will be needed for confirmation of appointees and other priorities. It would thus be surprising if more than a handful of rules are reviewed under the CRA. We may see several regulatory process reform bills introduced. A few, like the Regulatory Accountability Act, are focused on improving the quality of information—e.g., costs and benefits—used in new rulemakings. Others would require Congressional approval for new, major regulations or would permit judicial review of an agency’s economic justification for a new rule. And some would create a process for trimming red tape. Recent studies have shown regulatory accumulation—the build-up of red tape—to substantially slow economic growth, so these changes could substantially effect Florida’s economy.

6/1/2016

FLORIDA RANKED 6TH MOST FISCALLY STRONG STATE IN NATION Mercatus Center

Change will be slow

Changing the regulatory landscape is like turning a massive ship: sheer size and momentum make only minimal adjustments possible in the short run. Many presidents and congresses have been frustrated in their attempts to alter the course of the regulatory state, with hundreds of thousands of employees spread across scores of agencies and a complex web woven by decades of regulatory accumulation adding to its momentum. Unless new legislation directly alters the regulatory landscape (as happened with partial deregulation of rail, air, and truck transportation in the Carter and Reagan years), any rapid changes to the regulatory state would represent significant departures from historical patterns.

6/28/2016

FLORIDA ON PACE TO SWELL INTO $1 TRILLION ECONOMY Miami Herald

FOR MORE INFORMATION, PLEASE VISIT WWW.MERCATUS.ORG/ Jeff Atwater | Chief Financial Officer


JULY

7/7/2016

FLORIDA'S 2015 GDP GROWTH RANKED THIRD IN NATION Orlando Sentinel

PAVING THE PATH TO FLORIDA’S FUTURE By Mark Wilson

President & CEO Florida Chamber of Commerce

AUGUST

8/19/2016

FLORIDA RANKED IN TOP 10 FOR MOST FREE STATE IN NATION Cato Institute

8/25/2016

FLORIDA RANKED 2ND BEST LARGE STATE FOR STARTUP ACTIVITY Kauffman Foundation

Florida is known for its beautiful beaches, welcoming weather and no personal state income tax. But the Florida Chamber of Commerce knows the Sunshine State is also the crossroads for global trade – which is why many job creators are growing and relocating to Florida. Florida is a national leader in quality roads and bridges, is home to some of the world’s busiest airports, an expanding rail system, 15 seaports, and the best space port on earth -- all of which support international trade. By 2030, Florida is projected to grow by six million residents, and welcome 150 million visitors every year. Now is the time to focus on the future – not only to avoid the headaches and costs that come with roadway congestion, but also to increase market share and job opportunities.

Mark Wilson is President and CEO of the Florida Chamber of Commerce.

Florida faces two possible futures. One in which Florida continues investing in transportation – laying the groundwork for growth and emerging technologies like self-driving vehicles, expanded seaport activities, increased air travel and smarter transportation options. Or the other, in which our transportation networks become congested, Florida loses its place as a global leader and opportunities pass us by. The Florida Chamber’s International Division believes in Florida’s future, but we also know our future is fragile and our competition is real. Recently during the annual Florida Chamber Foundation Transportation Summit, Florida Department of Transportation Secretary Jim Boxold encouraged Florida’s



business community to remain focused on Florida’s global competitiveness by securing Florida’s transportation and infrastructure future. “The Florida Chamber Foundation’s focus on a long-range vision and their commitment to solving transportation issues has been instrumental in keeping Florida globally competitive. Transportation is the key to job growth, keeping our families safe and maintaining a good quality of life. As we look at the future of transportation, the technology tsunami is right around the corner. The business community is at the forefront of these changes and discussions like these are important in order to be ready for whatever the future has in store for us,” Secretary Boxold explained. Consider this…An efficient transportation system helps manufacturers deliver their products on time – keeping cost low and business growing. This allows manufacturers to explore new markets and create high-paying jobs for more families. The Chamber Foundation predicts that over the next three years, the world will see one billion new consumers. And, the global economy is expected to double in size over the next two decades. Ninety-five percent of the word’s consumers live outside of the United States, and international trade allows Florida companies to reach them.

AUGUST

8/31/2016

FLORIDA’S TRANSPORTATION INFRASTRUCTURE WON AWARD FOR EXCELLENCE American Association of State Highway and Transportation Officials

For the third straight year, Florida taxpayers have invested over $10 billion in state transportation funding. However, innovations and consumer behavior are changing the way people and goods are moved around Florida. Yet, with 1,000 new people moving to Florida every day, keeping up with Florida’s infrastructure investment needs can be a big challenge. How, for example, will Florida fund road maintenance and improvements when electric cars use our road, but don’t generate gas taxes?

SEPTEMBER

Florida has also made substantial investments in deepwater seaports. With nearly 15.2 million cruise passengers in 2015, and substantial shipments of containers and bulk shipments all around the world, Florida ports are more competitive than ever and ready for future growth. In fact, these investments have resulted in more than 200,000 new jobs since 2012.

9/2/2016

And, investments in Florida’s other trade infrastructure – inland ports, intermodal container transfer facilities, and rail – has helped create additional Florida jobs. According to the Business Roundtable, international trade supports more than 2.5 million Florida jobs. Improved infrastructure also yields benefits other than jobs for Florida. Florida hosted 106.6 million visitors from other states and nations in 2015, yielding more than $11 billion in tax revenue, $6 billion in state tax receipts, and $5.3 billion for local governments. Whether you’re safely transporting residents and visitors, transporting goods, exploring space, or expanding international trade, Florida’s transportation systems are at the intersection of job growth and global competitiveness. Florida can continue to lead the way for the nation by continuing to be a model for how states can improve their infrastructure and international competitiveness for the United States. When we get it right, Florida wins.

FLORIDA’S FIRST HURRICANE IN A DECADE The Atlantic

9/22/2016

FLORIDA RANKED AMONG TOP 10 STATES FOR DOING BUSINESS Area Development

FOR MORE INFORMATION, PLEASE VISIT WWW.FLCHAMBER.COM/ Jeff Atwater | Chief Financial Officer


FLORIDA’S BUSINESS RENT TAX

SEPTEMBER

9/28/2016

FLORIDA RANKED 4TH BEST BUSINESS TAX CLIMATE IN THE NATION Business Insider

By Dominic Calabro

President & CEO of Florida TaxWatch

OCTOBER

10/31/2016 FLORIDA’S JOB GROWTH RATE LEADS NATION Spacecoast Daily

NOVEMBER

11/16/2016

FLORIDA RANKED BEST STATE FOR ECONOMIC GROWTH PROSPECTS Forbes

Florida can boast about a lot of things. We are a premier tourist destination with an improving education system and an attractive economic climate that creates thousands of jobs every year. Florida companies enjoy some of the most business friendly tax rates and regulations in the country, which has propelled the state’s economy from one in decline during the Great Recession to one of strength. The Sunshine State consistently ranks among the best states to do business in the country and shows no signs of slowing down. However, the state can do more to improve the business climate to benefit both businesses and workers. One critical improvement is to reduce or eliminate the Business Rent Tax (BRT). While some cities and counties in other parts of the country levy similar taxes, the BRT is the nation’s only statewide sales tax on commercial leases.

Dominic Calabro is the President & CEO of Florida TaxWatch.

The tax is six percent, but counties have the discretion to levy additional taxes on commercial leases, causing some businesses to pay up to 7.5 percent in additional taxes. The BRT can add tens of thousands of dollars in additional operating costs and puts smaller businesses at a disadvantage to bigger companies who have the resources to afford the additional tax. It also distorts the natural economics of anchor stores for shopping centers or malls. Businesses must make tough decisions when determining where they wish to open up shop and for those looking to move to Florida, regulations and taxes like the BRT could force them to consider elsewhere. According to a survey cited in a Florida TaxWatch report, occupancy costs were the second most important factor when businesses



determined where to locate. Clearly businesses place a high premium on occupancy costs and the BRT lessens the attractiveness of the Sunshine State for relocation. To address this issue, Florida TaxWatch, the state’s independent, non-partisan government watchdog, has called for the reduction or elimination of the BRT. The reduction or elimination of the BRT is supported by numerous lawmakers and was a campaign promise of Governor Scott. The Governor also included this Florida TaxWatch recommendation in his Florida First budget recommendation for the 2016 Legislative Session. While eliminating the BRT would require a significant restructuring of revenue and expenditures, even a slight reduction would benefit a large number of businesses. All businesses that rent commercial real estate pay the sales tax on those rents, regardless of their profitability or financial shape. However, smaller and newer businesses would benefit the most from a reduction since many cannot afford to purchase real estate and therefore must lease space to conduct business. The Legislature has considered cuts to the BRT in previous sessions but despite support from many legislators, none have made it to passage. In the 2016 Legislative Session, the House originally had proposed a cut to the BRT from six percent to five percent in fiscal year 2016-17. After much debate and deliberation, this provision was not included in the final package signed into law by Governor Scott. The House also attempted a small reduction in the tax (0.2 percentage points) in 2015 but, like the one in 2016, it was also taken out of the final tax package that passed during the Special Session. Some might say a tight budget outlook could make this difficult though. In order to find funding for a reduction in the BRT, we must find effective cost-savings that will allow this reduction to occur. The findings in the Government Efficiency Task Force report are an excellent place to start, with recommendations saving the state upwards of $2 billion. If the BRT can be cut, it would boost our economy, help small businesses and create jobs, and improving Florida’s standing as the best state to live, work and play.

NOVEMBER

11/19/2016

FLORIDA ECONOMY GROWING IN THE ‘RIGHT’ WAY Tamps Bay Times

DECEMBER

12/20/2016

FLORIDA’S POPULATION CONTINUES TO RAPIDLY INCREASE WPBF

You can check out Florida's 2016 Government Efficiency Task Force Report here!

12/27/2016

FLORIDIANS FEEL POSITIVE ABOUT ECONOMY, FUTURE WFSU

FOR MORE INFORMATION, PLEASE VISIT WWW.FLORIDATAXWATCH.ORG Jeff Atwater | Chief Financial Officer


WINTER 2017

PRIVATE SECTOR JOBS CREATED

237,100

PRIVATE SECTOR JOB GROWTH

PRIVATE SECTOR REAL GDP GROWTH

m

2.3% m m mmm

FLORIDA BUSINESSES RAISED MORE THAN

$1 BILLION

HIGHEST Private Sector Job Growth in Nation

Higher than the national average of 1.7%

3.5%

FL

Faster than the national average of 1.2%

2.5 MILLION

16th largest economy globally Fourth largest economy in the nation

BUSINESSES

POPULATION OF

20.6 MILLION PEOPLE

IN VENTURE CAPITAL 1,007 people move to Florida every day!

247,000 HOMES

104,200

NEW HOME PERMITS ISSUED

MEDIAN HOME PRICES

UP 10% TO $220,000

SOLD

2

nd

SECOND BEST STATE FOR BUSINESS

6 th

4

th

FOURTH BEST BUSINESS TAX CLIMATE

SIXTH BEST FISCAL CONDITION

Source: Bureau of Labor Statistics Dec. 2016 | Bureau of Economic Analysis. 2Q-2016 | PWCMoneytree 3Q-2016 | U.S. Census Dec. 2016 | FL Realtors Dec.2016

JEFF ATWATER Jeff Atwater | Chief Financial Officer

CHIEF FINANCIAL OFFICER

For more information about Florida’s economy, please visit Florida’s Bottom Line 9 www.MyFloridaCFO.com/FloridasBottomLine/