State: Budget gap distresses legislators

"I want you to know how extremely proud I am of this year's state budget," Feeney says. "I believe it accurately reflects the priorities of the people of Florida."

Behind the scenes, Feeney and other key Republicans are now scrambling to stem a budget shortfall caused by the sluggish economy and unexpected expenditures, including health care premiums for employees and electricity in state buildings. The gap is expected to be between $400-million and $600-million, if not more, and Democrats are eager to capitalize on a situation that they say shows the error of Gov. Jeb Bush's tax-cut ways.

Personal calendars throughout state government have been cleared for Sept. 13, the date the normally obscure Revenue Estimating Conference meets to agree on the size of the budget gap. Experts study a range of factors -- from housing starts to car sales to corporate profits -- to project the amount of revenue the state can expect in the months ahead.

"There's no point in speculating about it until you see what happens Sept. 13. But I think we're going to have to make some tough decisions," says Sen. Locke Burt, R-Ormond Beach, who serves on legislative appropriations and auditing committees. "You've got to know how big is the number and what caused it. Then you can figure out what to do about it."

The forecast is shaky. Bush has already taken the extraordinary step of holding back 1 percent of the budgets for executive-branch agencies in the first quarter of the fiscal year that began July 1.

Some lawmakers wonder if the Legislature will have to call a special session to fix the shortfall. By law, the Legislature must meet if a budget deficit reaches 1.5 percent of the general revenue part of the state budget, which is about $20-billion. Budget experts for the Legislature say that would make the deficit trigger $300-million.

"Right now, we're in very strange, uncharted territory. I think we'll have to be called into a special session in late November or first thing in January. It scares me," said Rep. Ron Greenstein, D-Coconut Creek, who is monitoring the budget picture for House Democrats.

How did it happen? In a nutshell, state economists weren't counting on the economy faltering the way it has when they made their predictions, which lawmakers used to write the budget this spring. Now revenues, such as the state sales tax, aren't coming through at the levels predicted.

State analysts said late last month that Florida was about $150-million below what they thought it would be. Burt said that figure has risen to between $400-million and $600-million. Greenstein said he has heard it likely will be at least that much.

Already, Democrats are pointing fingers at Republicans, accusing them of helping create the deficit through the $1.6-billion in tax cuts the Republican-led Legislature approved in the past three years.

"It has come to my attention that, in the fourth week of the new fiscal year, Florida is already facing a revenue shortfall," House Democratic Minority Leader Lois Frankel, D-West Palm Beach, wrote late last month to Bush, who is up for re-election next year.

"What is your action plan to avoid a state revenue deficit? Are you considering asking the Legislature to postpone or eliminate the tax cuts to balance the budget?" Frankel continued.

Bush's answer is apparently no. In a letter to the St. Petersburg Times, Bush wrote this month that the tax cuts the Legislature passed and he signed have strengthened the state's finances.

"Tax cuts are good for the budget," Bush wrote. He added that the $1.6-billion in tax cuts has led to an average 4.1 percent annual increase in tax revenue, "because it is better to collect a smaller percentage of a larger pie than a larger percentage of a smaller pie."

The sales tax holiday parents enjoyed last month is estimated to have cost the state $28.5-million. Combined with the $175-million lawmakers cut this year in investment taxes, the tax cut has put Florida in a better financial picture compared with other states, Feeney said.

"If we hadn't cut taxes, I think we'd be in worse shape," Feeney said.

Other states that don't have Florida's business-friendly tax environment are facing even greater financial pressures as they grapple with the same forces that wiped out the federal government's predicted budget surplus almost overnight.

At $400-million, Feeney predicted, Florida's estimated deficit ultimately will fall short of the threshold needed to convene lawmakers in a special session.

"We're not even close to a dire situation," he said. "We're in a challenging situation." Rep. Mike Fasano, R-New Port Richey, said he's watching revenue projections carefully. But the House majority leader has not given up hope that the state can continue to trim a tax on investments that has been cut the past three years, as long the state's priorities -- especially education -- have been met.

And that means fewer dollars going back to home districts in the form of local projects, Fasano said. Already he has called on his colleagues, many of them still new to the Legislature, to resist padding next year's budget with extras.

"Everyone just has to be realistic and know we're just not going to have as many dollars as we've had in the past," Fasano said.

"There's definitely going to have to be some belt-tightening next year," he added.

Earlier this week, Florida's new Board of Education approved a budget proposal for the state's entire education system, and it included some significant increases for public schools and college financial aid.

Even though he knew the state's revenue projections might come up short, interim Board of Education Secretary Jim Horne proposed a budget that assumed a $650-million jump in general revenue.

"Education is the highest priority," Horne said. "I don't think the economy is as bad as everybody wants to portray it. I would not have thrown out (the figure of) $650-million if I didn't think it could happen."

-- Times staff writer Stephen Hegarty contributed to this report.

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