State faces $2 billion budget cut

Published: Thursday, January 10, 2008 at 6:01 a.m.
Last Modified: Thursday, January 10, 2008 at 12:00 a.m.

TALLAHASSEE - As lawmakers face an additional $2 billion budget shortfall and a decline in housing prices not seen since the Great Depression, the governor and top legislative leaders said Wednesday that all is not as gloomy as it seems.

It is a battle of mixed messages as unprecedented cuts in state spending seem likely to continue. Lawmakers already cut about $1 billion in October. House budget chairman Ray Sansom, R-Destin, told lawmakers in a memo Wednesday that the budget will have to be cut by an additional $2 billion this year.

"Unlike recent downturns in the U.S. economy, this time Florida seems to be worse off than the rest of the nation,'' Sansom wrote.

But Gov. Charlie Crist dismissed the darkening fiscal troubles Wednesday, telling a meeting of newspaper business editors that Florida is better off than the rest of the nation.

"There are some people that have some predictions for the future of our economy that are less than optimistic,'' Crist said. "Well, I'm an optimist and I don't buy into that.''

Where the cuts will fall is unknown. Crist promised to increase education funding Wednesday but did not detail where other budget cuts would occur. The Legislature's chief economist told House members Tuesday that a reversal of fortune will not occur until 2009 at the earliest.

Amy Baker, the coordinator of the Office of Economic and Demographic Research, said the state's primary "engine of economic growth'' has been the influx of residents. But after years of population growth that averaged 2 percent or higher for more than a decade, that growth will decline to closer to one percent over the next few decades.

She also said that revenue from taxes will be at least $1 billion less than forecast for each of the next four years. The biggest reason is a moribund real estate market with home prices falling at the greatest rate since the Great Depression.

Baker said that the state's excess supply of homes is more than 200,000 and that it may take nearly two years simply to sell the excess homes. She said prices are expected to continue falling into 2009 with a total reduction of home values in Florida likely to be greater than the 15 percent expected nationally.

Crist released a plan to "build Florida's innovation economy'' on Wednesday, but it provided little detail other than promises to help businesses grow.

Crist continues to promote the Jan. 29 referendum on a property tax cut as a needed boost to the state's real estate market. The plan would increase the homestead exemption and allow residents to keep Save Our Homes tax savings if they move. But most economists say the $9 billion cut over five years will have little impact on the state.

House Speaker Marco Rubio, R-West Miami, is promoting a deeper tax plan that would cap all property taxes at 1.35 percent of assessed value. Groups are currently trying to get 600,000-plus signatures to put the idea on the November ballot. Rubio supports that effort and did not rule out the possibility that House lawmakers could take up the idea on their own this spring.

Rubio said House leaders are considering "economic revitalization plans that will, I think, include significant tax relief. And that could include property tax as well. We'll have more news on that.''

Senate President Ken Pruitt, R-Port St. Lucie, however seemed to rule out any consideration of tax cuts in that chamber as a separate committee considers its own proposals for the November ballot.

Rubio said the budget crisis is an opportunity for lawmakers to "redefine Florida's economy and redefine Florida's government.''

He promised a "bold and aggressive'' review of the need for various state agencies, though he declined to specify which ones could be eliminated or merged with others.

"I think there's an opportunity for agency elimination,'' Rubio said. "We're working on it right now.''

Pruitt only said the Senate would study any plan to eliminate a state agency. But he said it was more important for the state to invest in a growing high-tech business environment and reduce the state's reliance on the service, tourism and construction industry.

"The days of moving to Florida with $500 in your pocket and moving into a mobile home, not that that's bad, and living in paradise are gone,'' Pruitt said. "Florida is no longer going to be a cheap state to live in. That's not all bad.''

Pruitt said slower population growth would allow the state to focus on "quality of life'' rather than unmanageable sprawl.

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