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Florida budget may be a billion short
SOURCE: Miami Herald
July 03 2007

Florida's economy is sputtering so badly that Gov. Charlie Crist and the GOP-controlled Legislature may be forced to order cuts in the more than $71 billion state budget that lawmakers passed less than two months ago. Since March, the state has taken in millions less in sales taxes than it anticipated, and there's no sign that the trend will change anytime soon. Barring an economic turnaround, the shortfall could be as much as $1.2 billion for the current fiscal year and the one that begins Sunday, according to state budget analysts.

If lawmakers tap state reserves to make up the shortfall, the move would leave Florida with roughly $600 million to deal with most emergencies until next summer.

'I know the shortfall is worse than we anticipated,' said Rep. Ray Sansom, a Destin Republican and chairman of the House Policy and Budget Council.

The situation is so dire that it threatens to unravel one of the big promises made by Crist and Republicans during the recent June special session on property taxes -- a pledge to have the state replace as much as $1.6 billion in school funding that would be returned to taxpayers in 2008 if voters approve a new super homestead exemption for homeowners on Jan. 29.

Lawmakers did not discuss the growing budget crisis during their June special session, when they passed the property-tax package. But Sansom acknowledged that there have already been informal discussions with the governor's office about asking state agencies to trim spending, or 'hold back' how much money they spend when the new state budget year starts.

'We know that could be a possibility,' Sansom said. ``We are all very aware of what is going on.'

A spokeswoman for Crist said the governor has already told his agency heads that they will be expected to 'tighten their belts,' although the governor has not yet formally ordered state agencies to start cutting their budgets. If Crist does decide to order agencies to cut spending, it will likely come in the next few days.


Florida lawmakers passed a $71.9 billion state budget this spring that actually cut the amount of spending from the previous year. Crist then vetoed more than $400 million in the budget when he signed it into law in May.

Legislators trimmed spending in the wake of forecasts that showed the state would actually collect less money from taxes this year than it had the previous year -- a downturn that had not happened in more than 30 years. Florida's main source of money is a 6 percent sales tax charged on most items, except food and medicine.

But the dour predictions made just three months ago by economists were too optimistic, signaling that the doldrums that have engulfed Florida may be worse than expected. State reports show that the state collected nearly $300 million less than expected for the months of March, April and May.

When state economists reconvene on Aug. 1 to draw up new forecasts, they could show a $1.2 billion shortfall -- $400 million for the current year, and another $800 million for the fiscal year that begins Sunday. While there's enough in the state's main budget reserve to cover that shortfall, it would leave Florida with roughly $600 million in that account. Florida has $3.5 billion in two other reserve accounts, but there are restrictions on tapping into that money.

And if tax collections continue to drag, or if the state gets hit with a hurricane, lawmakers could be forced to hold a special session this fall to cut the budget. That's what happened six years ago when Florida's economy took an economic hit following the attacks of Sept. 11, 2001.

Republicans and Crist say they hope the property-tax rollbacks, coupled with a property insurance package passed in January, will stimulate the economy and replenish the state's bank accounts in the coming months.


'We will create a better bottom line for Floridians and our state,' Crist said last week when he signed the property-tax package.

But House Democratic Leader Dan Gelber said the worsening financial picture for the state is one reason he thinks Republicans can't keep their promise to keep school funding intact next year.

'Our state budget is built on spit and paper clips, and the idea we will find $2 billion around to hold education harmless is just plain wacky,' Gelber said.