Fla. revenue estimate down, Crist eyes reserves

TALLAHASSEE — Gov. Charlie Crist said he may ask lawmakers to tap reserves and a tobacco settlement trust fund to make up for the latest in a series of revenue shortfalls that emerged Friday from a meeting of state economists.
The new estimate cuts general revenue by nearly $1.8 billion below a March forecast the Legislature used to write the state’s $66 billion annual budget that took effect July 1. The revenue estimate for the next budget year also is being reduced by almost 2.2 billion.
The Legislature anticipated the state’s economic outlook might continue on its downward trend so this year it also passed a law letting Crist seek approval from a special legislative panel to transfer money from reserves and the Lawton Chiles Endowment Fund. The latter invests the tobacco money for future use on health and children’s programs.
The deficit in the new revenue estimate will trigger the emergency funding law.
It makes up to $1 billion available from the Chiles fund, named for the late governor and U.S. senator, and $672 million — half of the total — from the budget reserve fund. The current budget also carries over about $326 million in unspent cash from the last fiscal year.
Those sources total about $2 billion — more than enough to cover the new revenue shortfall without spending cuts.
“I don’t want to overreact but I want to be prudent,” Crist said. “So, what I think we’re going to do in the short term is look at the reserve funds eventually.“
Crist also noted that a few weeks before the new budget took effect, he had asked state agencies to hold back 4 percent of their budgets.
“That saves a considerable amount of money, about $800 million,” Crist said.
The Legislature met in special session last October to cut the 2007-08 budget and slashed it again in regular session this year. The current $66 billion budget is about $6 billion less that the original 2007-08 budget.
The new funding law makes a special session unnecessary this year, said House Policy and Budget Chairman Ray Sansom, R-Destin.
“Going forward, we will continue to meet the state’s essential needs, and we will stand by the same principles that guided this year’s budget: no increased property taxes; no additional borrowing; and no expanded gambling,” said Sansom, also the House’s speaker-designate. “Government cannot demand more from its residents and businesses than they are able to give.“
House Democratic leaders sent Crist, a Republican, a letter questioning his 4 percent holdback and urging him to call the GOP-controlled Legislature into special session owing to the magnitude of the revenue shortfall. Democrats in the past have urged that recent tax cuts be repealed and other steps be taken to increase revenue, but the letter did not offer any specifics.
“Many economists believe that cutting services during bad economic times only makes the economy worse,” the Democrats wrote. “We suggest asking our experts if we are making things worse by cutting, and if so, whether there is a better way to address the shortfall?
The letter was signed by House Democratic Leader Dan Gelber of Miami Beach, his designated successor, Franklin Sands of Weston, and Democratic Leader Pro-Tempore Joyce Cusack of Deland.
General revenue is the only part of the budget that lawmakers can use as they please and it accounted for $25.1 billion of the current budget before the new estimate. The rest of the budget is made up largely of trust funds that must be spent in specific ways, such as gasoline taxes for roads and bridges.
The new estimate for only $23.37 billion in 2008-09 general revenue will make this the third year in a row it has fallen below the previous year. That’s never happened before in the history of the Revenue Estimating Conference, which began making forecasts in 1971, said Amy Baker, a member of the panel.
General revenue should be higher next year at $24.66 billion, although short of the previous forecast. The conference also revised its estimates for the following two years: $26.69 billion in 2010-11, down $2.2 billion from the prior forecast, and $28.8 billion in 2011-12, down $2.14 billion.
The state economists have repeatedly reduced their general revenue forecasts, made three times annually, over the past two years because the forecasts have not kept up with the speed or depth of the state’s economic decline.
The continued housing slump, rising fuel costs and growing inflation are key factors that contributed to the latest estimate reduction.
“Everybody knows we had $4 gas in the last quarter and that inflation has been creeping up,” said Baker, coordinator of the Legislature’s Office of Economic and Demographic Research. “So that’s eating through our sales tax estimates ’cause we’re saying people just aren’t going to be in a position to have a lot of disposable income.“
Sales taxes are the biggest single component of general revenue. The new estimate slashes them by nearly $1.2 billion to $17.9 billion.
The estimate also significantly reduces revenues from corporate income tax, documentary stamp taxes that are paid on real estate and lending transactions and insurance premium taxes.