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Crist Looks To Reserves As Revenue In State Ebbs
Aug 16, 2008
The Tampa Tribune
TALLAHASSEE - Record plunges in state revenue are punching a $1.5 billion hole in the state budget this fiscal year, triggering emergency authority for Gov. Charlie Crist to dig into state reserves.
It also could force more cuts to education, health care services and other parts of the $66 billion state budget, which is already $6 billion less than the budget lawmakers passed in May 2007.
"They had a painful session last year, and it is going to be a significant hole to fill," said Alan Johansen, staff director for the Senate Committee on Finance and Tax.
Falling consumer sales, high energy prices, a miserable housing market and rising unemployment are lowering projected state revenue by $1.8 billion, a conference of the state's top economic analysts said Friday.
That is leaving a budget hole of nearly $1.5 billion in 2008-09, given the $326 million cushion that lawmakers left unspent in the current budget.
Mike Duckett, an analyst for Gov. Charlie Crist, painted a gloomy picture on Friday of the economic "doldrums" that are causing Floridians to send fewer tax dollars to the state.
"We're all painfully aware of higher energy prices," Duckett said. "The energy prices are spilling into other areas now, too; food prices are much higher, and it puts a greater strain on households and household budgets. We're not looking for very good job growth over the next year, we're declining a little bit. ...This is probably the worst growth in population since I've been here; we're well below 1 percent this year and just below 1 percent next year."
Even tourism, one of the few bright spots in prior forecasts, may begin faltering because of increased economic instability abroad, said Tim Campbell, analyst for the state office of Economic and Demographic Research.
'This Is Really Unprecedented'
Lawmakers based the current year's state budget on a March forecast that Florida would take in $25.1 billion in general revenue in fiscal 2008-09. But that revenue is now expected to reach less than $23.4 billion - about $740 million below collections in 2007-08. This marks the third straight year of revenue decline for the state.
Hurricanes, further tightening of the credit market and worsening energy prices could cause Florida's economy and its tax receipts to degenerate further, the analysts said.
"This is really unprecedented - again," said House Minority Leader Dan Gelber of Miami Beach, who wrote to Crist on Friday asking that he call a special session to revise the state budget.
Leading Republican lawmakers were less enthusiastic.
"The budget we passed in May reduced spending and included a mechanism for accessing reserves to pay the state's bills this fiscal year, without the need for a special session," House Speaker-designate Ray Sansom, R-Destin, said in a statement.
Last spring, lawmakers expanded the governor's authority to tap into state reserves in the event of a large shortfall. With approval from the Legislative Budget Commission, Crist may shore up the budget by taking $1 billion from the Lawton Chiles Endowment Fund for health care services, as well as one-half of the state's roughly $1.35 billion budget stabilization fund.
That, plus the $326 million cushion in the budget, brings the total money available to $2 billion.
'No Money In The Bank'
But spending all that reserve money "is not without its down sides," said Kurt Wenner, research director for Florida TaxWatch.
The state normally tries to set aside several hundred million dollars in the budget to cover unforeseen costs, he said; pouring all of that money into the budget hole means "there will be no money in the bank."
Lawmakers were wise to authorize Crist to use the Chiles and budget stabilization funds in a pinch, Wenner said. But he noted that it is one-time funding; using the funds to shore up ongoing programs just means that cuts will have to be made later, absent a spike in revenue.
Friday, the analysts predicted that economic growth will not rebound until late in fiscal year 2009-10. Revenue collections are not expected to exceed 2005-06 levels until after that budget year.
Wenner predicted that Crist and lawmakers will combine reserve money and budget cuts to fill the gap as well as provide some cushion to guard against unforeseen costs or disasters.
Crist laid the groundwork in June for possible budget cuts when he ordered all agencies not to spend 4 percent of the money they were appropriated this fiscal year, worth about $1 billion. Lawmakers will have to agree, however, to turn the hold-backs into permanent cuts.
Crist spokesman Sterling Ivey said the governor has not yet decided on a strategy for plugging the shortfall.
Mike Haridopolos, chairman of the Senate Committee on Finance and Tax, said the hold-backs plus availability of reserves could stave off the need for lawmakers to cut the budget before the regular 2009 session.
"We're going to have to make those tough calls. The other alternative - higher taxes - is untenable."