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Economy Casts Cloud Over Sunshine State

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By CATHERINE DOLINSKI

cdolinski@tampatrib.com

Published: November 22, 2008

Updated: 11/22/2008 12:12 am

TALLAHASSEE - Bad economic news flooded in from all directions Friday, as state economists predicted tax collections would come up short by $1.4 billion and new figures showed that unemployment had soared to 7 percent.

That, plus a tourism dip reported this week, adds up to a deepening crisis that threatens to cripple the economic health of local and state governments, not to mention Florida's families. Some state leaders are intensifying their push to have the governor call a special session to deal with the state's financial problems.

The $1.4 billion downturn in tax receipts comes on top of a $1.8 billion shortfall state economists had already projected in August. State leaders have mitigated some of the shortfall by raiding other funds and making cuts, but the declining revenue has widened the hole in the current state budget to $2.1 billion, a deficit lawmakers and the governor are legally obligated to fill by June 30.

"There is a difference that came between August and now, that primarily came because of the freezing up of the credit market, the shift from a national recession to a global recession, and the fact that there's been a serious loss in asset wealth," Amy Baker, coordinator of the state Office of Economic and Demographic Research, said at a conference Friday.

The picture gets bleaker next year. In August, the state lowered its revenue estimate for next year by $2.2 billion; on Friday, the projection dropped an additional $2.3 billion.

If lawmakers tried to pass a budget next year that merely continued spending on current programs and priorities, they would come up short by as much as $5.8 billion.

Nothing Is Safe

The plummeting revenue and widening budget gaps jeopardize every facet of government spending, from roads to public schools to health care. In October alone, state revenue fell $181 million short of expectations.

That was the same month Florida shed 156,200 jobs, compared with October 2007, according to the state Agency for Workforce Innovation. October's 7 percent unemployment rate was the highest in Florida since December 1993. Much of the unemployment came from declines in construction, which lost almost 80,000 jobs.

Jobs have been particularly tough to come by in the Tampa Bay area, where unemployment has reached 7.4 percent and tourism has fallen. Statewide, room demand declined 7.9 percent in September, compared with 3.1 percent nationwide, according to a recent report by Smith Travel Research of Hendersonville, Tenn.

In Hillsborough County, demand for hotel rooms declined 12.3 percent in September from that month a year ago. The hotel industry's key performance measure, revenue per available room, declined 16 percent in September to $43.47.

Falling tourism is among the factors depressing the state's sales tax receipts. By the end of Friday's conference, state economists had dropped their sales tax estimate for the current fiscal year by $693 million.

The economists' projections in August were dark enough to trigger emergency action by the governor, who withdrew $675 million from the state's rainy day fund this fall to make sure the state stays in the black.

CFO Wants Special Session

Chief Financial Officer Alex Sink and other Democrats began calling for a special session to decide where to cut the state budget, although Crist and GOP legislative leaders have remained noncommittal. Thus far, they have appeared more inclined to make across-the-board spending reductions without reconvening and deal with whatever problems remain at the start of their next regular session in March.

Crist already has ordered a 4 percent spending "hold-back" across all agencies, worth an estimated $500 million to $700 million, which could be made permanent reductions.

Crist also has authority to draw $1 billion from the Lawton Chiles Endowment Fund, which normally pays for health care. However, a $700 million loss in the invested fund's value this year has prompted Sink to warn against raiding it.

On Friday, the state CFO reiterated her call for a special session to address the budget. House Speaker Ray Sansom and Senate President Jeff Atwater said they were weighing all of their options but committed to nothing Friday.

Whatever path lawmakers choose to handle this year's shortfall, budgeting for next year promises to be brutal business. Any reductions will come on top of the $6 billion that lawmakers have sliced over the past fiscal year from health care, criminal justice and other areas.

"The budget's broken, and we have to have a special session to cut spending right away," said Democratic Rep. Ron Saunders of Key West, a former House budget chairman. "If we're going to do it in March - if we wait - it just gets worse."

Reporter Ted Jackovics contributed to this report. Reporter Catherine Dolinski can be reached at (850) 222-8382.

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