Tallahassee, FL - With tax collections slowing, Medicaid costs rising and Florida housing still a mess, state lawmakers may be facing a budget shortfall whose depth is around $3.5 billion next year, analysts said Tuesday.
House and Senate committees were given a wide range of staff briefings that effectively laid out the economic challenges facing lawmakers and Gov.-elect Rick Scott once work on the 2011-12 spending plan begins in earnest early next year.
Amy Baker, executive director of the Legislature’s Office of Economic and Demographic Research, provided a most sobering summary to the Senate budget committee – warning that an expected $2.5 billion spending gap was certain to grow. Although Baker did not put a figure on the new gap, House budget analysts later told legislators that a $3.5 billion budget hole may loom, if adequate reserves also are included.
The shortfall facing lawmakers when they begin building next year’s $70-billion-plus budget will become even clearer when economists meet Dec. 14 to revise their revenue projections.
But Florida’s almost 12 percent unemployment level, compounded with the nation’s second highest rate of home foreclosures, has state economists already predicting that it will be spring 2016 before the state’s job market looks anything like 2007, when the jobless rate was less than 4 percent.
“We are starting to show improvement year over year,” Baker said. “It’s just not as strong a level as we’d hoped for.”
State tax collections are showing signs of that faltering recovery, having fallen $136 million below forecasted levels for the three months ending in October. Baker said November totals may land $100 million short of expectations.
She added that an estimating conference scheduled for Friday also is certain to add thousands more Floridians to Medicaid rolls already on track to absorb $21.7 billion, or $2 billion more than current spending, in part because of a drop in enhanced federal matching funds.
“The number is going to be big,” Baker warned senators.
Sen. Don Gaetz, R-Niceville, who had a career in health care running a hospice services company, said Florida’s economy reminded him of a term used in that industry.
“There’s a catch-all diagnosis when everything seems to be going wrong called ‘multi-system breakdown,’” Gaetz said. “That’s not an inappropriate phrase to describe what’s happening in housing, employment and all the other indicators.”
Median home prices in Florida, which soared to $257,800 in 2005, have slouched to $136,600, a decline of a stunning 47 percent, analysts said.
Although the drop in home prices have fueled sales in recent months – and may eventually spur another retiree influx – they also carry scars from the battered economy.
In her overview, Baker pointed out that 58 percent of August home sales were dwellings either in foreclosure or with delinquent mortgages. Bank credit also remains tight, with 42 Florida lending institutions having failed in the past two years, she added.
Scott will enter office Jan. 4 with an agenda anchored on cutting state spending, removing regulatory barriers for businesses, reducing property taxes and beginning a phase-out of the state’s corporate income tax. He has pledged to put the state on course to create 700,000 jobs over the next seven years.
House budget chair Denise Grimsley, R-Lake Placid, said she was undaunted by the darker state revenue picture, saying that tax cuts and business incentives remain part of the package aimed at jump-starting the economy.
“We’re going to look at every possible option to help business grow and help the economy grow,” Grimsley said.