Declining Florida Real Estate Tax Revenue Leaves New Administration Short On Cash

The slowing Florida housing market means that Governor-elect Charlie Crist (right) and state lawmakers will have almost $400 million less to spend in 2007 than expected, clouding the prospects of some of Crist’s campaign promises.

Meeting a week after Crist was elected Florida’s 44th governor, a panel of economists on Tuesday downgraded the state’s forecast cash flow for next year by $466 million. That was only slightly offset by an unanticipated increase in revenues of about $71 million this year.

The Revenue Estimating Conference attributed the decline to weaker-than-expected Florida real estate activity, the Orlando Sentinel reports this morning.

Receipts from a tax on real estate transactions, such as home sales and Florida mortgage loan refinancings, slumped particularly hard in 2006. But sales tax revenue weakened somewhat, as spending related to the housing market — everything from construction materials to household appliances — also dropped off.

“We’ve been talking about this for several conferences now. This is just more intense than what we anticipated,” said Amy Baker, coordinator of the Office of Economic and Demographic Research.

That’s not to say Florida has gone bankrupt.

Led in part by strong corporate-income taxes, revenues are rising. So the Florida economy is still expected to have about $2.3 billion more to spend next year when compared with this year. Outgoing Gov. Jeb Bush and the legislature have also socked away more than $6 billion in reserves.

But it’s a dramatic change from the past few years, when a sizzling housing market, rebounding tourism industry and — even admist a much-touted homeowner’s insurance crisis — rebuilding from two record-setting hurricane seasons produced unprecedented windfalls.

Last year, for example, a nearly $7 billion surplus landed in the laps of Bush and lawmakers, allowing them to spare Florida mortgage holders big assessments on their insurance bills — by bailing out debt-wracked Citizens Property Insurance while pumping a near-record amount of cash into public schools.

Crist shrugged off the gloomier-than-expected forecast.

“I’m just grateful we are left with a surplus,” the outgoing attorney general said after a Cabinet meeting in Tallahassee.

But Crist, who must submit his first budget to the Legislature in January, has an expensive wish list. Among the measures he promised voters while campaigning across the state:

• 10 percent raises to the top 25 percent of teachers, expected to cost $150 million.
• Stiffer penalties for probation violators, which state analysts estimate would lead to an extra 1,400 prisoners and cost $118 million a year by 2010.
• Reading coaches in every public school, which could cost more than $100 million.
• Crist also wants to carry out the controversial class-size amendment that mandates smaller classes across the state, which Jeb Bush sought to overturn almost from the moment voters approved it in 2002. It’s expected to consume another $2 billion for construction and operating costs.

And those measures don’t even include a pair of enormous Florida property tax reforms Crist is pushing. Doubling the homestead exemption and allowing homeowners to keep their Save Our Homes tax breaks even when they move would lead to billions charged to cities (a plan known as a portability) counties and school boards.

Crist insisted the Sunshine State can afford the initiatives, noting that state government still expects to see a surplus next year.

“Given that equation,” he said, “it looks pretty good for Florida.”