TALLAHASSEE, Fla. (AP) -- Florida economists on Friday projected that state legislators could have an extra $3.5 billion to spend in the coming fiscal year.
Despite concerns that automatic spending cuts at the federal level would dampen the state's economy, economists said there are definite signs of recovery, bringing with it higher tax collections as Floridians spend more.
But they pared back their estimates slightly in the wake of federal cuts in defense and other areas.
Senate President Don Gaetz, R-Niceville, welcomed the news, but cautioned that he may want to boost reserves in case the federal cuts prove more damaging.
"Any modest improvement could be more than offset by the potential significant impact caused by sequestration," Gaetz said in a statement, referring to the automatic budget cuts triggered by the lack of a budget agreement in Washington. "This uncertainty, caused by a lack of leadership in Washington, highlights Florida's need to plan ahead, be cautious and to maintain adequate reserves."
In December, economists projected that the state's tax collections - one sign of the economy's health - would grow around 5 percent for the next two years. But that was before the bruising battle between President Barack Obama and Congress over whether to let spending cuts go forward.
Florida economists went back and forth during the day over whether to adjust the 5 percent figure downward based on the still-uncertain impact of the budget cuts - or project a slight overall increase based on increased spending patterns in the last few months.
In the end they concluded that growth will be just less than 6 percent for the first half of this year, then growth will proceed at a slightly slower rate of 4.5 percent between July 2013 and June 2014.
Amy Baker, the head of the state's Office of Economic and Demographic Research, said economists have concluded so far that the federal spending cuts would create a "one time shock" this year.
State legislators will use the final estimates to build a new state budget they are expected to adopt between now and early May. The amount of money available could determine if legislators agree to spend money on Republican Gov. Rick Scott's priorities such as a $2,500 teacher pay raises.
Based on the latest forecast, legislators could set aside $1 billion in reserves, meet crucial needs such as increased student enrollment and still have roughly $1 billion left over. That's money that could be used for the pay raise, or tax cuts or even incentives sought by some of Florida's professional sports teams.
The automatic federal cuts that took effect earlier this month were expected to result in the furloughs of thousands of civilian employees. The Pentagon has estimated the furloughs would result in a payroll reduction of $185 million to federal employees in Florida.
The state's current overall budget is nearly $70 billion, but that includes federal aid for such programs as Medicaid, the safety-net health care program for the poor, and money that is spent on road-building and transportation. Scott proposed a $74.2 budget for the coming year.