One in 157 Florida homeowners are in foreclosure proceedings. Sound Advice is shuttering its 22-store, Florida-bred chain by year's end. A pair of Tampa Bay Chevrolet dealers are out of business. Put simply, don't expect Florida's economy to rebound anytime soon.
But that's exactly what Gov. Charlie Crist and the Republican leaders of the Florida Legislature are banking on. Even as Wall Street and Washington rush to adapt the federal financial bailout to the deteriorating economy, Florida's leaders are standing by, going along as if plans made in May can still work in November if the state just keeps dipping into reserves and other accounts. That only delays the tough decisions, and the governor and the Legislature cannot continue to put off the inevitable.
The problem will come into sharper relief Friday when the state's economists revise their estimate of state tax collections for the fiscal year. Three months, ago the economists warned Florida would collect $1-billion less in taxes in 2008-09 than originally projected in March. Many expect that number will double on Friday.
Florida leaders have responded to the state's economic crisis using a playbook written months ago. In June — just one day after signing the 2008-09 budget — Crist ordered state agencies to curtail spending by 4 percent in anticipation of budget shortfalls. And last spring, lawmakers, in anticipation that the picture would worsen as the year went on, gave Crist unprecedented authority to tap the state's piggybanks to stave off any further cuts in services. So far Crist has, with a legislative panel's approval, moved $672-million from reserves to pay the state's bills.
But that money, which comes from Florida's hurricane recovery fund, must be paid back within five years. Crist also has the option to raid the state's Lawton Chiles endowment, which until now has been used solely to pay for health care and children's needs. That money would have to be repaid, and there's not as much of it as there was six months ago due to losses in the stock market, as Chief Financial Officer Alex Sink pointed out last week. What was $2.1-billion in the summer is now just $1.5-billion, due to losses and because the Legislature has already spent $118-million from the endowment as part of the annual budget.
Using reserves to fund daily operations is short-sighted at best and catastrophic at worst — particularly since state leaders have no plan for any scenario other than that the economy will rebound before the money runs out. But that has consequences. Florida's strong credit rating has been based, in part, on the strength of its reserves. As the state depletes them, it increases the cost of borrowing money. What's more, no one can predict when the economy will improve nor what other emergency the state may face before then — say an active hurricane season in 2009.
Crist indicated last week he is open to making more cuts or dipping deeper into reserves — the same basic plan he had in the summer. Legislative leaders won't commit to any action, even as the new Legislature convenes in Tallahassee Monday and Tuesday for its postelection organizational session.
Rather than the customary pomp and circumstance, the Legislature should get straight to work. The responsible path is clear: Call a special session before the end of the year to craft an updated budget for the rest of 2008-09 that responsibly cuts some services and raises some new revenue to reflect fiscal reality. It won't be easy or politically pretty. But it offers more leadership than standing by and hoping for the best as the state's financial situation continues to get worse.