When Floridas legislators gather in March for the 2011 legislative session, tackling the states $3.5 billion deficit will be one of their most difficult tasks. Many states face similar (or worse) situations, but that fact wont make it any easier.
The U.S. Census Bureau released data Wednesday revealing a $1.1 trillion drop in total state government revenues between 2008 and 2009, a 30.8 percent decline. Florida accounted for more than $13 billion of that total, falling to $45.5 billion in 2009.
In general, state revenues plummeted due to decreases in trust fund revenues for public pensions, unemployment compensation, workers compensation and other trusts like Social Security and Medicare. Florida fell victim to the trend, with much of its revenue decline directly attributable to losses in trust funds.
Other populous states saw steep revenue declines, thanks largely to drastic losses in their social insurance trust funds. California, New York and Texas witnessed revenue slides of 44 percent, 37 percent and 32 percent, respectively, between 2008 and 2009.
State governments and their social safety nets came under increasing strain during that time and remain so, as unemployment jumped and is at 9.8 percent nationally and 12 percent in Florida. Rampant bank failures, increases in personal bankruptcy rates and foreclosures resulted from the burst of the housing bubble and the shock to the markets, meaning revenues for social insurance trust funds dropped just as they were needed most.
In Florida, the Office of Economic and Demographic Research estimates the states unemployment compensation trust fund will run a deficit during the current fiscal year, and wont run a positive fiscal year balance until 2014. Meanwhile, business leaders are already upset that unemployment compensation taxes are expected to nearly triple later this year, from about 25 cents per employee to about 73 cents.
Gov. Rick Scott has pledged to make Florida as business friendly as it can possibly be, attacking taxes, regulations and litigation as the axis of unemployment during his inauguration speech Tuesday, and signing an executive order in his first act as governor creating the Office of Fiscal Accountability and Regulatory Reform to oversee the effect of regulations on job creation.
Scotts firm belief in the private sector is at the heart of his economic policies, and his administration will be relying on new and expanding businesses to jump-start Floridas economy, increasing growth and government revenues. Increasing taxes is not an option for Scott or the Legislature.
The state of Florida raises enough revenue to meet its needs, Scott said during his inaugural speech.
Senate President Mike Haridopolos, R-Merritt Island, has also pledged to not raise taxes, meaning any deficit reduction is likely to come in the form of spending cuts. Scott campaigned on streamlining state government agencies and his transition team even suggested combining the Department of Transportation, the Department of Environmental Protection and the Department of Community Affairs --but given the size of the budget hole, the Legislature may have to do most of the heavy lifting.
To that end, Haridopolos and House Speaker Dean Cannon, R-Winter Park, have targeted Medicaid reform as one of their top legislative priorities. Medicaid currently makes up 26 percent of the state budget and its share is only expected to increase.
Reach Gray Rohrer at grohrer@sunshinestatenews.com or at (850) 727-0859.
