Politics

Budget takes another hit

State legislators are told they may have to reduce spending by another $600-million this year.

By STEVE BOUSQUET, Tallahassee Bureau Chief
Published January 9, 2008

TALLAHASSEE - The bad news about Florida's budget just keeps getting worse.

State legislators learned Tuesday that they may have to reduce the current year's budget by as much as $600-million for two reasons: a prolonged economic slump shows no sign of ending and previous revenue forecasts, while conservative, have turned out to be overly optimistic.

"At this point it's definitely prudent to start building a reserve or a hedge, against any further reduction in the forecast," state economist Amy Baker said in testimony before the House Policy and Budget Council, the committee that assembles the state budget.

Baker ticked off a series of unfavorable economic trends in Florida, such as a slowdown in population growth, falling home prices, record high oil prices and a credit crunch in the financial markets. She even used the R-word: recession.

"Housing downturns are frequently a precursor to a recession," Baker warned.

She suggested that lawmakers set aside $400-million to $600-million to get through the rest of the fiscal year through June 30 based on sales and other state tax collections in the past two months that have fallen $98-million short of earlier forecasts. Cutting current services is one way to do that, but there are other ways.

For legislators, the scenario has become depressingly familiar. They made $1.1-billion in spending cuts in the fall to bring the budget in line with declining revenue, and the latest fiscal outlook for next year projects the need for another $2-billion in cuts to get through June 2009.

The council's chairman, Rep. Ray Sansom, R-Destin, told reporters it was possible, but not definite, that lawmakers would take up a budget reduction bill in February or March The regular session begins March 4. Asked where specific cuts might be made, Sansom said, "It's too early to tell."

In a year in which all 120 House members face re-election, lawmakers likely will explore all other options before making the unpopular choices of cutting aid to public schools, senior citizens or sick people. Sansom said options included privatizing more state services or dipping into the surpluses in stand-alone budget accounts known as trust funds that are supported by specific taxes or fees and spent for specific programs such as road-building or affordable housing.

Mike Hansen, the House's chief budget expert, said the total amount of tax revenue expected to be available for next year's budget, $27-billion, is the lowest amount since the 2004-2005 fiscal year.

The situation is so dire that a series of business leaders, who in rosier economic times often plead for less government spending, urged council members to ramp up state appropriations for roads and economic development projects that they said would create jobs and kick-start the economy.

Sansom, who is expected to become House speaker in November 2008, said that if voters approve the property tax cut amendment on the Jan. 29 ballot, it would stimulate the economy, but he conceded the effect would not be felt immediately.

Times staff writer Alex Leary contributed to this report, which included information from the Associated Press. Steve Bousquet can be reached at bousquet@sptimes.com or (850) 224-7263.

Fiscal year Revenue chng.

2005 m $699-million

2006 m $2.5-billion

2007 m $2.4-billion

2008 m $817-million

2009 n $602-million

How bad is it?

Next year is projected to be only the second time since 1989 that revenue is estimated to fall short of funding the base budget.

Fiscal year Revenue chng.

2000 m $1.2-billion

2001 m $1.7 billion

2002 m $974 million

2003 m $451-million

2004 n $314-million

Source: Florida Revenue Estimating Conference

[Last modified January 8, 2008, 23:39:36]