Slower Florida Housing Market Means Leaner State Budget, Experts Say

State economists are expected Tuesday to lower their forecast for how much money Florida has coming in for the first time in several years because of a slowdown in the housing market that has fueled the state’s economic outlook.

Economists update the state’s tax revenue estimate twice a year, projecting how much Florida can expect to collect so lawmakers know how much they have to work with when writing the budget.

For the last several years, it’s been nothing but good news each time, as state budget writers have been experiencing the equivalent of unexpectedly finding money in the pocket of a new pair of pants.

Since the Florida housing market boom started a few years ago and the state began its recovery from a slowdown caused by the 2001 terrorist attacks, economists kept having to revise their incoming tax forecast every time they got together, with predictions for more money.

Just last April (the last time the state revenue estimating conference was held) economists said the state would have nearly $1 billion more coming in from state and property tax revenue than previous projections forecast.

But this time, collection of the property tax on real estate transaction documents is expected to be much slower as fewer people apply for Florida home loans and use them to purchase houses. Sales of existing homes have declined in every month this year compared to 2005, the Florida Association of Realtors’ statistics show.

There is expected to be some good news as corporate income taxes have continued to come in strong, blunting the impact of the bad news in the housing market. Fortunately, Gov. Jeb Bush and the Legislature have made it a priority to sock away a lot of money for just the rainy day that economists now fear is coming.

The state has more than $6 billion in cash reserves built up to avoid having to cut deeply into programs when the economy takes a downturn. Lawmakers held $2.5 billion in reserve this year. Still, legislative leaders already know Tuesday’s forecast may be the worst in years.

“I would expect to hear that it’s not 2003 or 2004,” incoming House Speaker Marco Rubio, R-Miami, said earlier this week.

Fortunately, economists say Florida typically is insulated from the depths of economic downturns felt more acutely in other parts of the country. As Rubio put, “I’d rather be Florida than anyone else.”

The state has continued to create jobs well ahead of the national pace and unemployment. At 3.2 percent statewide, the unemployment rate remains below the national rate of 4.6 percent. That means purchasing should remain adequate to keep sales tax revenue from dropping too much. A continued influx of baby boomers and demand for Florida home improvement loans certainly doesn’t hurt, either.

Much of the state’s sales tax collection power, however, relies on tourism, and that’s dependent in large part on the state of the national economy.

Despite the long-running boom, state economists began cautioning back in the spring that the economy was coming in for a landing. The South Florida housing market, in particular, has cooled as affordable housing becomes a scarce commodity.

Even as they said current year collections were going to be higher than expected, experts have projected much slower growth next year than they have been seeing in recent years. Still, the economists said that a slow down would only put Florida’s economy back to normal growth after a few years of expansion.