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A Decade of Borrowing Could Force Deeper Cuts

January 27, 2011 - 6:00pm

Deeper budget cuts may be needed to satisfy Wall Street, a top senator said Thursday, as a decade of heavy borrowing is forcing a call for higher budget reserves, which now loom as a driver of lawmakers spending decisions.

Senate budget chief J.D. Alexander, R-Lake Wales, said Thursday that legislators should consider setting aside $2.5 billion in reserves roughly 10 percent of state tax collections to avoid the risk of financial analysts downgrading state bond ratings and adding even higher cost to Floridas record-level debt.

If we have to pay more for our bonds its going to cost us a lot more, Alexander told the Senate budget committee. Credit rating is important for us.

State government debt climbed to $28.2 billion last year up almost $2 billion from a year earlier, according to the states Division of Bond Finance. While lawmakers are already struggling to close a $3.6 billion budget shortfall, the states tide of red ink last year forced $2.1 billion to be taken from Floridas $70 billion spending plan just to cover debt service.

Gov. Rick Scott and fellow Republicans in the Legislature got plenty of political mileage last year campaigning against the Obama administration for running up the federal deficit. But state lawmakers, while required to balance the budget annually, have managed to cut taxes and still maintain spending by borrowing more than $11 billion since Gov. Jeb Bush took office in 1999, ushering-in a dozen years of GOP leadership.

Alexander said the state currently has about $1.2 billion in reserves. But the effort to roughly double that level this spring to placate ratings firms could now force lawmakers to slash state spending by some $4.8 billion.

When you look at the budget hole, we have no more rabbits in the hat, Alexander said.

But with the bulk of state dollars going to public schools and rapidly rising Medicaid rolls, Alexander and fellow Republican Sen. Don Gaetz, R-Niceville, said it was vital for lawmakers to find areas where costs could be reduced.

Senate President Mike Haridopolos, R-Merritt Island, and House Speaker Dean Cannon, R-Winter Park, have already indicated that putting most of the states 2.9 million Medicaid recipients into managed care is a policy shift all-but-certain to be approved during the spring legislative session.

The first-year cost-savings are still unclear, lawmakers concede. But in a comment that seemed directed toward frequently critical Democrats, Gaetz said that those deriding specific budget cuts should be forced to offer an alternative reduction, or attach their name to a proposed tax increase.

We can spend the next hundred days wringing our hands and bemoaning that we have to cut our favorite programs but it becomes unproductive, Gaetz said, in recommending what he said should be an operating principle.

We need a little bit of tough love, Gaetz said.

Senate Democratic Leader Nan Rich of Weston, however, said lawmakers have to consider the unintended consequences of individual budget cuts. As an example, Rich said that many children wind up in state foster care because their parents are struggling with drug abuse. Cutting drug treatment programs, Rich said, could force more children into state care.

Rich said lawmakers could draw more tax dollars into the treasury by reviving attempts to close some sales-tax exemptions. The effort was last undertaken two years ago, but abandoned by legislators who failed to reach consensus.

I think that should still be on the table, Rich said.

Alexander, though, said he was more intent on cracking into the 15,000 contracts the state holds with private vendors providing government services agreements that amount to $8 billion in annual spending, according to the states Department of Management Services.

Gaetz and Sen. Bill Montford, D-Tallahassee, said that during their previous service to county school boards, it was common for officials to press vendors to renegotiate contracts during hard economic times something state government should consider this year.

State records show that 6,144 contracts are in line to be renewed, terminated or subject to re-bid in the coming year.

Alexander is planning to revive legislation he sponsored last year that strengthened the states hand in contracting and another bill that would have put DMS the states main contracting agency under control of the governor and Cabinet, instead of the singular authority of the governor.

That measure was vetoed last year by former Gov. Charlie Crist, and lawmakers ceded to Scott last fall by not making the power shift part of a series of vetoes they overrode during a special session.

Alexander said he still thought the move was needed.

I dont know how we do our job if we are not monitoring this spending, Alexander said.

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