TALLAHASSEE — A slump in sales tax collections and a spike in Medicaid costs is prompting state economists to forecast an even bigger budget shortfall for next year of $3 billion or more.
Filling that hole could force state legislators to make deeper spending cuts than they had anticipated.
Amy Baker, director of the Legislature's Office of Economic and Demographic Research, briefed the Senate Budget Committee Tuesday on the state's overall financial picture.
While she didn't give lawmakers a hard number, House budget officials later told their members that the budget shortfall could be between $3 billion and $3.5 billion.
Baker's assessment wasn't all bad. She noted that housing sales are up, unemployment has declined from last spring and the state's rate of population growth is slowly improving.
But otherwise, it was a grim picture:
Nearly 3 million people in Florida, or roughly one of every six residents, relies on Medicaid, the joint federal and state health care program for the needy. The $20 billion program pays for 51 percent of all childbirths in the state and 69 percent of all nursing home stays.
Florida's foreclosure crisis is so bad that more homes are being vacated than are being sold to home buyers, adding to excess inventory, Baker said. Three of the top 10 U.S. metropolitan areas with the highest numbers of foreclosures are in Florida: Cape Coral/Fort Myers (No. 2), Miami-Fort Lauderdale (No. 7) and Orlando-Kissimmee (No. 10).
Due to record foreclosures and a continuing drop in the value of real estate, property tax collections are running $150 million below the state's projections.
Median home prices have dropped by nearly 50 percent, from $257,800 five years ago to $136,000 today, Baker's report said.
Federal economic stimulus money will soon dry up and the state will also have to start repaying a $1.8 billion loan from the federal government for unemployment compensation — yet another reflection of the poor economy.
"We are starting to show improvement year over year,'' Baker said. "It's just not as strong a level as we'd hoped for.''
But the biggest budget time bomb is Medicaid, which already swallows nearly half of the state's sales tax money.
Projected increases in Medicaid costs will be updated at a revenue conference Friday. Baker sought to brace lawmakers, telling them: "The number is going to be big," possibly in excess of $400 million.
A budget shortfall is the projected gap between the state's available revenues and the cost of high-priority needs: paying salaries of teachers, prison guards and state troopers, paving roads, operating health clinics and processing applications for food stamps and other forms of public assistance.
House budget experts Tuesday were describing a $3.5 billion shortfall, in part because House leaders are intent on setting aside as much as $1 billion for emergencies.
Facing the backdrop of a shortfall of $3 billion or more as he prepares to take office, the question is how Gov.-elect Rick Scott can fulfill his campaign promise to cut property taxes by 19 percent.
"It's too early to speak to that, one way or the other," said Senate Budget Chairman J.D. Alexander, R-Lake Wales. "Clearly, putting more money in people's pockets helps them to grow … business and feed their families. But, that said, we are facing a fairly challenging economic situation."
Sen. Joe Negron, R-Stuart, who chairs the Senate health budget committee, said he expects to have to trim $1 billion to $2 billion in health care costs. He said he is targeting "soft" services, such as payments to consultants, who don't provide direct care to patients.
"If you're not feeding, housing or caring for people directly, we can't afford what you do," Negron said Tuesday.
Negron and the Senate plan to unveil a Medicaid overhaul plan that would increase use of managed care plans. The Senate approach is likely to differ from the House plan, which would give more control over the program to large HMOs.
Times/Herald staff writer Marc Caputo contributed to this report. Steve Bousquet can be reached at email@example.com or (850) 224-7263.