TALLAHASSEE -- The cooling economy is sending a deep chill through Florida, with state tax collections expected to be $150 million less than projected -- prompting fear that lawmakers soon may be forced to wield the budget ax.
The state's $48 billion budget just took effect July 1. But declining tax receipts leave the state with a wafer-thin reserve that is not expected to cover current spending plans if the economic trend continues, legislative leaders said.
Lawmakers say they could find themselves engaged in serious belt-tightening this fall, the likes of which have not been seen since the economic slump of the early 1990s, when $1.6 billion was slashed from state programs over three years. "It looks like this soft economy is going to be with us for a while," said House Speaker Tom Feeney, R-Oviedo. "We might have some tough choices ahead of us."
For Gov. Jeb Bush and the Republican-led Legislature, the timing couldn't be worse. Already, leaders are looking ahead to a politically charged year, with congressional and legislative redistricting and a governor's race on the horizon.
Toss in a sour economy, along with possible cuts to state services and social programs, and the political mix could get volatile.
"We all saw the writing on the wall," said House Democratic Leader Lois Frankel of West Palm Beach. She is running for the Democratic nomination for governor with hopes of challenging Bush's re-election next year. "The economy is not as robust," Frankel said. "Yet the Republican Legislature still gave away $175 million in tax breaks this spring. This is not a pretty picture."
While concerned about the slowing economy, Bush supported the tax cuts and readily signed them into law. About $25 million in cuts cover a back-to-school sales-tax holiday that begins Saturday and runs through Aug. 5. But the largest share -- $150 million -- will go toward reducing the intangibles tax on investments paid mostly by wealthier Floridians.
Bush last month vetoed $288.8 million in programs and projects. In part, the move was designed to bolster the state's so-called "rainy-day" reserve fund, used to defend against shortfalls in state tax dollars.
But since then, state officials say, the tax receipts continue to slide, and they now expect to collect $117 million less in sales tax, along with $72 million less in corporate income tax. The reductions are attributed to a decline in retail sales -- with recession-leery Floridians staying out of stores and limiting vacation spending, while state businesses are reporting reduced earnings.
The reduced cash flow is leaving the state with a reserve of about $150 million for the budget year. Once that cash is depleted, lawmakers likely would be forced to begin trimming state programs and services. The state does have a separate, constitutionally required budget reserve that now totals $941 million, but restrictions on its use make it more likely that program cuts would be carried out first, officials said.
Sen. Locke Burt, R-Ormond Beach, said it was "ironic" that House Democrats last week joined with teachers unions in asking Bush to call for a special legislative session to boost public-school funding by steering the veto money to the classroom.
"They're assuming that there's $300 million in the rainy-day fund. But guess what? It's not there," Burt said. "The numbers are going south -- a lot. We're not in good shape."
The Democrats' move shows the sagging economy could emerge as a weapon in their attempt to derail Bush's bid to become the first Republican governor in Florida history to win a re-election campaign.
The governor's father, President George Bush, was defeated for re-election in 1992 when the state and nation were going through the last period of economic turmoil, a fact not lost on Florida Democrats.
The governor, who last week was on a state trade mission to South America, so far remains optimistic about the state's budget picture, a spokeswoman said. But, quietly, he has taken an unusual step aimed at slowing this year's spending, by effectively keeping money out of the hands of agency heads.
Once the budget year begins, agencies normally receive their dollars on a quarterly basis. But using powers granted the governor under state law, Bush this month reduced that first-quarter check by 1 percent, holding back money that might be needed later this year if the economy tanks.
"We want to act responsibly and be prepared for the future just in case the economy continues downward," said Lisa Gates, a Bush spokeswoman.
Lawmakers expect to have a better idea by September of the budget task ahead of them. By then, a state economic forecast will be completed and new revenue estimates prepared.
With redistricting ahead, the Legislature is on an accelerated timetable and is scheduled to begin committee meetings in September, with next year's session set to open in January, two months earlier than usual. Lawmakers say they will be close at hand to tackle budget problems, if necessary.
Feeney, who advocated a $350 million tax-cut package this year, only to grudgingly accept the $175 million compromise, said he welcomed prospects of carving "less-than-essential" spending from the state budget.
"It may not be much fun, but cuts can force some real discipline on agencies and programs," Feeney said. "It's a challenge. An opportunity."