TALLAHASSEE — Florida lawmakers got a billion more reasons Friday to call a special session on the state's unstable finances.
Budget forecasters determined there will be $1.4-billion less tax and other revenue this fiscal year, widening an already dangerous budget hole to $2.14-billion.
Having already slashed and re-slashed the state's $66-billion budget, Gov. Charlie Crist and legislators face a narrowing set of options: They can borrow money from fast-dwindling reserve funds, raid single-purpose accounts known as trust funds or lock in existing 4 percent holdbacks on all state agencies.
They also may consider making deeper cuts to the state budget or laying off state workers. Local cuts could show up in less money for public schools or increased fees for services.
Further bad news: This shortfall won't be the last. "The worst is definitely ahead of us," said Amy Baker, chairwoman of the state Revenue Estimating Conference.
Experts predict the next fiscal year budget gap could be $5.8-billion, a reality that will have to be confronted when the regular session begins in March and may force the most serious discussion in years about new taxes or fees.
The bleak outlook, which is likely to persist into 2010, was attributed by experts to "three persistent economic shocks": a shutdown of the credit market; a global recession affecting business investment and tourism; and a sharp drop in wealth from unemployment and decaying home values.
Florida's economy tanked with the housing market but is now hit a second time by the national and global crisis.
The updated revenue forecast will become the driving force for Crist and the Republican-led Legislature, which likely cannot avoid a special session in December. "It definitely swings the pendulum in (that) direction," said Sen. Mike Fasano, R-New Port Richey.
The news came on the same day that Florida's unemployment rate hit 7 percent for October, the highest jobless rate since December 1993 and half a percentage point higher than the national rate of 6.5 percent.
The leaders of the House and Senate said the revenue numbers tell an "unsurprising, but disappointing story" and warrant more study. A carefully worded statement, however, did not hint at a special session.
"All options will be under consideration and we will work as quickly as possible to determine the best course of action," House Speaker Ray Sansom and Senate President Jeff Atwater said. Crist, in a statement, said he looked forward to working with the leaders.
"These are historically challenging economic times our state is facing, but just like Florida's families, we will continue to tighten our belts and live within our means," Crist said.
Even if lawmakers exhaust rainy day funds and utilize the holdbacks to deal with the current deficit, they would still be $970-million short.
One possible source is the Lawton Chiles endowment, created in 1999 to honor the former governor's legacy by using tobacco settlement money to pay for health care programs. The fund holds just over $1-billion, having lost $600-million in value due to the stock market decline.
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All across the economic spectrum, the effects of a recession are hammering Florida's bottom line. Sales tax collections are sliding downward because people are buying fewer cars and fewer tourists are coming to Florida.
Fewer cars on the road mean fewer license tags and fewer insurance premium taxes — two other important revenue sources for the state.
Shopping is down, or people are heading to Wal-Mart instead of the mall. Families are staying in, rather than eating out.
All told, declining sales tax account for $692-million of the $1.4-billion in less overall revenue for the state this year, economists said Friday.
As corporate profits tank, corporate income taxes will continue to sink. They are projected to drop another 6 percent next year, or $220-million.
People are even smoking less, which is why cigarette sales taxes, already the 46th lowest rate among states, are also in decline. (Some Democratic lawmakers plan to propose a $1-a-pack tax increase on cigarettes to generate $1-billion annually.)
The state is being forced to liquidate its long-term securities to improve short-term cash flow, which means it is selling off those assets before they mature — creating what Jerry Bowman, a revenue analyst in the Governor's Office, to call "the perfect storm with our investment portfolio."
Rep. Franklin Sands, the Democratic minority leader, attributed the tailspin to "Republicans' tax policies of the past decade" that gave breaks to corporations and the wealthy.
"I am glad that Gov. Crist opened the door this week to discussing increasing revenue," Sands said in a statement. "However, every option should be available for discussion so we can begin to develop a more equitable tax structure for the middle class. These discussions must begin now and be dealt with in a special legislative session next month."