Too like California? Florida among states with fiscal woes that could hurt U.S., says Pew study
Some of the same pressures that have pushed California toward economic disaster are wreaking havoc in Florida and eight other states, with "potentially damaging consequences" for the entire country. So says a new report released today by the Pew Center on the States. In addition to Florida, Arizona, Illinois, Michigan, Nevada, New Jersey, Oregon, Rhode Island and Wisconsin join California as the 10 most troubled states, according to Pew’s analysis called Beyond California: States in Fiscal Peril. Here is the full report.
Specifically, Florida, Michigan, Nevada and Oregon are struggling in part because their economies have depended so heavily on particular industries -- in Florida's case, real estate and tourism. States the Pew analysis:
"This reliance on a sector may have paid off in times past, but it put these states at greater risk when the recession hit. States cannot choose their natural resources, of course, but they can budget and manage for additional volatility that can result from dependence on a particular sector. States increasingly are seeking to diversify their economies."
The Pew analysis notes the following weaknesses in Florida's fiscal status:
1, For the first times since World War 2, Florida's population is shrinking-- "a disturbing trend for a state that has built its economy, and structured its state budget, on the assumption that throngs of new residents will move to its sunny shores each year."
2. The recession has reversed Florida's growth. No. 2 among states in economic growth in 2005, it ranked 48th in 2008.
3. Though Florida enjoyed some of the biggest gains in jobs just three years ago, its current unemployment rate of 11.0 percent puts Florida among states with the highest jobless rates in the country.
4. The boom in property prices almost doubled tax revenues in many Florida cities between 2001 and 2006, swelling state and local budgets. "Now Florida's governments face significant problems raising enough revenue to cover expenses," the Pew report says. The state is bracing for a deficit as high as $2.6 billion in fiscal 2011.
Concludes the report about Florida: "This is uncharted territory for a state whose conservative budgeting practices, constitutionally required reserves and go-go-economy largely have kept it out of fiscal trouble for the better half of the past century."
The bigger picture? The budget troubles of Florida and these other nine states can have significant repercussions for their residents, Pew says. Higher taxes or fees; layoffs or furloughs of state workers; longer waits for public services; more crowded classrooms; higher college tuition and less support for the poor or unemployed: All are starting to crop up in Florida.
These budget troubles also pose challenges for the nation as a whole, says Pew:
"Together, the 10 states account for more than one-third of America’s population and economic output. And actions taken by state governments to balance their budgets—such as tax increases and drastic spending cuts—can slow down the country’s recovery."
The Pew Center on the States will discuss this report more in depth this afternoon. We'll offer the highlights of that conversation shortly.
-- Robert Trigaux, Times Business Columnist