State short on money

State budget writers have been given some more bad news. The state’s Consensus Estimating Conference met today to revise its forecast of Florida’s general revenue collections and the economists reduced their revenue estimates for FY 2007-08 and FY 2008-09 by a combined $2.945 billion, including almost $2 billion for the upcoming state budget year.

Estimated revenues for FY 2007-08 (ending June 30, 2008) were reduced by $1 billion (3.9%) from the previous estimate (November 2007) and expected revenues for FY 2008-09 were decreased by $1.942 billion (7.3%).

This revision continues an unprecedented series of reduced forecasts. The $27.5 billion estimate on which lawmakers based the current yearís budget has now been reduced three times by a little more than $1 billion each time. Revenue estimates for the upcoming budget are now $4.6 billion less thanwhere they were a year ago. Collections next year are expected to increase a scant $110 million from the current year. This follows actual annual decreases in general revenue in both FY 2007-08 and FY 2006-07, the first time in Floridaís history that this has happened.

The state’s economists said that Florida’s continuing economic downturn is now being affected by the nation heading into a recession. Tight credit, rising energy prices, falling employment, and further deterioration of the housing market are all having a negative impact on Florida. Reduced wealth from housing price depreciation and falling consumer confidence have resulted in less spending on big-ticket items and other non-essentials, and sales tax collections are suffering. Documentary stamp and intangibles tax collections are down due to tighter lending practices. Compressed profit margins cause in part by higher energy prices are cutting into corporate income taxes.

The economists also indicated that there is a great deal of uncertainty about the economy and that significant downside risk still exists with the latest forecast.

The legislature has already cut the current budget by more than $1.5 billion, including $512 million in cuts to be voted on tomorrow. House leaders have already indicated they will not cut the current budget further. Instead, the new shortfall will be made up with non-recurring revenue.

Next yearís budget will have to be cut. Claims that $3.5 billion will have to be cut are overstated. The official general revenue outlook statement is not yet available, but it appears that the $24.6 billion of recurring general revenue available in 2008-09 will be approximately $1.5 billion less than the current yearís recurring expenditures, after the recent budget cuts.

Now is a time for great fiscal statesmanship. Florida must not try to tax its way out of this economic downturn, which would only make matters worse. Instead, the state must work aggressively to help the economy and streamline government activities to improve efficiency and thereby reduce cost.

Florida must continue to protect our stateís citizens ñ especially the most vulnerable ñ by preserving core functions, the rule of law, public safety, and public health. Yet nothing, no program or government function. should remain immune from efficiency and productivity improvements, which will save money and better deliver the services to those who need them most. We must
scrutinize all areas of government spending to devise an actionable plan to wisely cut and consolidate in order to help the economy, provide for the citizens, and balance the budget.

All sources of good ideas must be explored. One example is the state-employee winners of the Prudential Financial Davis Productivity Awards. The state should direct that every state employee, team and work unit to check more than 800 adaptable achievements, organized in more than 60 work areas on the Florida TaxWatch website , to determine whether they can
adapt/implement any of these achievements in order to save money and improve productivity.

The state should also use available non-recurring revenue to fund a smart economic stimulus/development package that includes one-time spending on needed infrastructure and targeted tourism marketing.

As the economic challenges facing Florida, its citizens, and the legislature become clear, Florida TaxWatch offers to Floridaís leaders the experience of its 29 commitment to helping improve taxpayer value and government efficiency. Florida TaxWatch research can help the legislature implement cost-cutting measures, improve efficiency, and eliminate non-critical support functions and duplication within agencies and government-wide.

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