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Blowing Savings Risky Way For Florida To Balance Budget

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The Tampa Tribune

Published: September 13, 2007

Gov. Charlie Crist wants to 're-fire' the state's cooling economy by spending down state reserves and trust funds.

It's a dangerously optimistic plan, given the small amount of money at his command and the weakness of the national economy.

If Crist is right and home sales and sales tax collections rebound in the spring, his gamble would pay off. If he's wrong, he would put the state in a deeper financial hole just as a new round of property-tax cuts threaten to take a bigger bite out of state and local revenue.

Florida should continue to build the roads and schools it needs most, but it lacks the money to spend faster just to create more construction jobs.

The best way to deal with the unexpected $1 billion shortfall in the state budget is to follow the orders that Crist and the Legislature gave cities and counties: make tough choices about spending.

The Senate suggests cutting the budget of every state department by 4 percent, an approach that wrongly assumes all state budget items are equally important.

The House wants bigger cuts in transportation and economic development while sparing education and social services. That plan is flawed because it could hurt job growth in the midst of a painful housing slowdown.

The state needs Crist's leadership to come up with a compromise plan that makes smaller across-the-board cuts. The budget plan should eliminate nonessential pet projects, such as $80 million for human genome research at the University of Miami. Crist is absolutely right that the state should save $10 million by delaying new medical schools at Florida International University and the University of Central Florida. But he should spare higher education the devastating 6.2 percent cuts he originally suggested. And Crist should find a way to leave the state budget with adequate reserves for rainy days and hurricanes.

Next year's budget situation could be even darker, warns Amy Baker, director of the Legislature's Office of Economic and Demographic Research. If no cuts are made this year, next year's shortfall could be $2.5 billion, about 8 percent of total state revenue.

Crist is right that now is the wrong time to cut deeply into spending for construction of roads and schools. Needed projects should be built.

But neither can the governor stimulate a $700 billion state economy with less than $1 billion in targeted spending. And letting reserves dwindle to $200 million in a $71 billion budget would be as irresponsible as a household with an annual income of $71,000 letting its savings dip to $200.

Crist's duty is to protect the state's priorities as best he can without exposing it to too much risk. The larger economy is beyond his control. And he should level with voters about the diminishing prospects of protecting public-school budgets from any cuts.

Florida cannot expect rapid growth to continue to shield it from troubles in the nation's economy. Evidence is strong that growth has slowed. Last month, the country lost jobs for the first time in four years. Tampa has been among the nation's hottest job markets, but this year's job growth is expected to be a meager 1.2 percent.

Housing prices are down nationwide by 1.5 percent from last year, and more than 3 percent in Tampa and many other Florida cities. Mortgage foreclosures are up, especially in Florida and other states where real estate prices have been increasing rapidly.

Here in Tampa, a new Census survey shows that 43.2 percent of homeowners are spending at least 30 percent of their income on housing costs, and nearly 17 percent are spending half their incomes or more on their homes. These folks aren't likely to go on a spending spree next year.

Crist and the Legislature should note that the Federal Reserve is expected to cut interest rates on Tuesday as recession becomes a bigger worry than inflation.

No matter what the economy does, Florida is constitutionally bound to balance the state budget. Crist can't print money. All he can do is help lawmakers minimize the pain of cutting spending to match revenue.

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