Tallahassee, FL - Florida’s budget shortfall hit at least $3.5 billion Tuesday as analysts dialed-back the state’s revenue forecast, saying sluggish tax collections and a still-faltering economy are complicating the balancing act facing Gov.-elect Rick Scott and legislators.
This year’s collections shrunk by $585.7 million, while next year’s forecast was trimmed by $612.2 million, with sales-tax and corporate income tax declines leading the retreat. Reserves are available to patch this year’s reduction, although once they do, the state’s rainy day fund will dwindle to a meager $249 million at mid-budget year.
Amy Baker, executive director of the Legislature’s Office of Economic and Demographic Research, and part of the four-member panel that made Tuesday’s forecast, blamed the scale-back on a slower-than-expected economic recovery for Florida.
“Long-term I don’t think our view has changed, I think we’re all optimistic, but over the next 18 months, things are quite a bit slower…than we anticipated,” Baker said.
In its summer meeting, the same Revenue Estimating Conference warned state lawmakers that tax dollars were pointing to a likely $2.5 billion budget shortfall. But the latest findings deepen that hole by at least another $1 billion, Baker said.
Sales taxes – which amount to almost three-quarters of Florida’s tax collections – have been falling short of expectations, forcing economists to reduce forecasts by more than $800 million this year and next. Corporate income tax, which Scott wants to eliminate over the next seven years – also has failed to meet expectations – resulting in a combined $234 million forecast reduction this year and in 2011.
Compounding the budget woes: Costs are going up.
“Today’s revenue numbers didn’t make legislators’ jobs any easier,” said David Bishop, a spokesman for Senate President Mike Haridopolos, R-Merritt Island. “But everything, with the exception of raising taxes, is on the table.”
Medicaid expenses – already in line to climb by $2 billion over this year – will likely tick upwards another $300 million as more Floridians lose jobs and health benefits because of the state’s faltering economy, analysts said earlier this month. Declining property values have prompted a $150 million drop in anticipated school tax collections even as forecasters reported this week that enrollment is on track to hit a six-year high in 2011-12.
Reaction from those faced with crafting a budget next year was swift – but sketchy.
House budget chief Denise Grimsley, R-Lake Placid, said, “we will take a close look at Florida’s budget to determine how to best allocate our limited resources. Each year we face difficult choices as we move through the appropriations process.”
A spokesman for Scott also said that the drop in available dollars also didn’t shake the incoming governor’s push to cut $1.4 billion in property taxes and eliminating the corporate income tax.
“He’s looking at all options,” said Trey Stapleton of Scott’s transition office. “But if you make a commitment in the campaign, you stand by it.”
Analysts late last month signaled the bad news when they revamped their forecast for the state’s overall economy. But their generally tepid evaluation of such state drivers as housing and unemployment did include some glimmers of hope.
While Scott during his campaign promised to add 700,000 jobs to Florida’s economy, forecasters actually said that should be relatively easy to achieve – predicting an additional 1 million jobs likely over the next seven years, partially fueled by the draw of rising state population.
Unemployment, though, now close to 12 percent, is expected to remain in double digits until the second quarter of 2012, analysts said.
Analysts Tuesday said the downsized tax collections also will endure. Revenue levels are not anticipated to exceed those of 2005 – the height of the state’s housing boom – until 2013.