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State's budget gap could be nearly $5 billion

TALLAHASSEE — The magnitude of Florida's fiscal crisis became clearer Thursday as the Senate's top budget writer called for larger cash reserves to pacify Wall Street bond rating firms.

Sen. J.D. Alexander, R-Lake Wales, told members of the Senate Budget Committee that the state should sock away $2.4 billion in reserves next year, a figure equal to 10 percent of what's raised from general taxes, to meet a guideline he said Wall Street looks for from states.

"If we have to pay more for our bonds," Alexander said, "it's going to cost us a lot more. Credit rating is important for us."

When added to the existing shortfall, the state's new budget gap is $4.8 billion.

Florida borrowed heavily over the past decade, mostly for major construction projects at colleges and universities, and total state debt ballooned to $28 billion. The state pays $2.1 billion yearly in debt payments.

The current state budget has about $1.2 billion in reserves that could be carried over to next year's budget, so another $1.2 billion would need to be put in the bank. When added to the existing shortfall of $3.6 billion, you get $4.8 billion.

Gov. Rick Scott confirmed the approximate figure.

In banter with Scott, a reporter offered to lose weight based on the difference between Scott's budget proposal and the state's current $70.4 billion budget.

Scott, a fitness buff with a history of dealmaking in the business world, made the reporter a counter-offer that suggested his budget proposal would be $5 billion less.

The existing shortfall of $3.6 billion is due to a combination of factors, including tepid tax collections during the recession, a disappearance of federal stimulus money and expanding Medicaid rolls.

Senators said the bleak picture will necessitate deep cuts and policy shifts, such as shifting most of the state's 3 million Medicaid recipients into managed care plans, forcing state workers to pay part of their retirement benefits, reducing the size of the state work force and tightening state oversight of 15,000 contracts with private vendors.

Education and health care together account for nearly two-thirds of the budget, with the state now spending about the same amount for Medicaid as it does for all education programs: $22 billion.

"The bottom line is, Medicaid has hijacked the rest of the budget," said Sen. Joe Negron, R-Stuart.

The Republican majority on the budget committee quickly ruled out tax or fee increases as an alternative to cutting programs.

Sen. Nan Rich, D-Weston, leader of the dozen Senate Democrats, said lawmakers should consider closing tax loopholes or taxing Internet sales.

She warned of the unintended consequences of cuts in human services, especially mental health and substance abuse treatment, that could wreak havoc on families and result in more poor children being shuffled into foster homes.

"I just feel we have to find a better way," Rich said.

Alexander, an acknowledged budget expert who's in the final two years of a 14-year legislative career, despaired of the news that awaits Florida's 126,000 state workers.

"I did not run for office to tell state employees we want to cut your pay and benefits," he said, "but we are where we are."

Scott will submit budget recommendations to the Legislature on Feb. 7, but lawmakers traditionally do not pay much attention to the governor's proposals.

After that, the next major development in the budget crisis is an update of the state's revenue picture, scheduled for mid March.

Times/Herald staff writers Michael C. Bender and Katie Sanders contributed to this report. Steve Bousquet can be reached at bousquet@sptimes.com or (850) 224-7263.

State's budget gap could be nearly $5 billion 01/27/11 [Last modified: Thursday, January 27, 2011 9:36pm]
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