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Report: Florida among 10 states facing budget disasters

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By CATHERINE DOLINSKI | The Tampa Tribune

Published: November 11, 2009

Updated: 11/11/2009 10:12 pm

TALLAHASSEE - Florida is among nine states barreling toward an economic disaster similar to California's ongoing fiscal crisis, a new study warns.

The budget woes could mean higher taxes, accelerated layoffs of government employees, more crowded classrooms and fewer services in the coming year, analysts for the Pew Center on the States said.

While IOUs and budget-busting deficits have been hallmarks of California's fiscal problems, the study found that Florida, Arizona, Illinois, Michigan, Nevada, New Jersey, Oregon, Rhode Island and Wisconsin are most at-risk for economic calamities of their own.

Double-digit budget gaps, rising unemployment, high home foreclosure rates and built-in budget constraints are the prevailing reasons.

"While California often takes the spotlight, other states are facing hardships just as daunting," said Susan Urahn, managing director of the Washington, D.C.-based center. "Decisions these states make as they try to navigate the recession will play a role in how quickly the entire nation recovers."

The analysts noted that the "Great Recession has not just stalled Florida's growth — it has reversed it."

For example:

From 2005 to 2008, Florida fell from its second-place ranking among the states in economic growth to 48th.

"Not too long ago, Florida was adding as many as 445,000 residents a year" - but from April 2008 and April 2009, the population shrank by 58,000."

In 2006, the state's job market was one of the nation's strongest. As of September, Florida's 11 percent jobless rate was eighth-worst.

Skyrocketing property values doubled property tax revenues during the boom. Yet "as of this writing, there were at least 275,000 homes for sale or rent in Florida that nobody wanted, and the state has the second-highest foreclosure rate in the country."

These and other antigrowth factors add up to a serious state revenue shortage.

Despite cutting $6 billion from state spending since spring 2007, state lawmakers expect revenues to come up $2.65 billion short of covering Florida's most "critical and high priority needs" in 2010-2011 – a deficit that's expected to swell to nearly $5.5 billion the following year.

Of the $2.65 billion, $923 million is deemed "critical," while the rest pays for other traditionally funded services, like a program that covers lifesaving medication for transplant recipients and other chronically ill patients.

Even that sensitive program's fate is now uncertain, Senate budget chief JD Alexander, R-Lake Wales, said recently, warning that increasing Medicaid costs are compounding the state's fiscal problems.

Florida's Constitution prevents it from running up deficits like California's. But fiscal conservatism has also limited Florida's options, the report states, "because it has no income taxes and its per-capita spending on education and social services is already low, so cuts are difficult to make."

Pew Center analysts urged states like Florida to take quick action to head off a wider economic catastrophe. The 10 states account for more than one-third of America's population and economic output, according to the report.

State Sen. Mike Fasano, R-New Port Richey, had not yet seen the report but "respectfully disagreed" today with lumping Florida into the most-at-risk group.

"We are not in the same category as Illinois and Michigan, and definitely not in a category similar to California," he said. "Just two or three years ago, we were being praised by the underwriters and others on Wall Street and around the country because of how fiscally responsible Florida was."

Fasano, who leads the Senate's budget committee on economic development and transportation, said he believes Florida's economy will recover more quickly than has been predicted. But that rate of recovery, he said, will depend largely on how aggressively Florida works to expand its job base and how well it lures aging Baby Boomers to retire in the coming years.

"I think we're going to attract many of them," he said. "In my opinion, Florida is still the greatest state to live in."

The Associated Press contributed to this report. Reporter Catherine Dolinski can be reached at (850) 222-8382.

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