Homeowners Insurance, Property Taxes Blamed For State’s Declining Revenues, Budget

Schools and social programs will have to fight for disappearing dollars this year after state economists Monday slashed almost $1 billion from a two-year revenue forecast, a tax-collection downturn blamed on a stalled Florida housing market.

According to the Fort Lauderdale Sun-Sentinel, the current budget year will be Florida’s first in 33 years where less tax money was brought in compared with the year before. It’s a slump not seen since 1974-75, when the nation was reeling from an Arab oil embargo that spiked energy prices.

This time, the news stems from a slowdown in Florida mortgage activity that has resulted in a sharp reduction in home sales, property values - and most importantly to the state, anticipated tax dollars. The hot housing market allowed tax revenue to pour into the state treasury in recent years.

“What it shows are state revenues coming back to normal after being at an elevated state for a number of years,” said Amy Baker, coordinator of the Legislature’s Office of Economic and Demographic Research.

For lawmakers only beginning to prepare a $71 billion state spending plan for next year, the reduction was expected but still grim news.

The cash-flow problem makes certain a tighter budget year that likely will yield less money for public schools, universities and Florida’s poorest and sickest residents. Education and human services spending absorb more than 75 percent of state tax dollars.

The Republican-led Legislature says it will try to spend wisely.

Dollars will be earmarked for road, school and university building projects with an eye toward kick-starting the economy. The tactic was used after the 2001 terrorist attacks, successfully, when lawmakers slashed $1 billion from the state budget because of a drop in tourism.

First-year Republican Gov. Charlie Crist used the starker revenue news to echo his call for overhauling the state’s property tax system, saying that high taxes are choking Florida’s economy.

“If we reduce the burden of homeowners insurance … and property taxes, we will refire this engine that is Florida’s economy,” Crist said.

“I’ve predicted it before, we’ll have a sonic boom in this economy. That’s why it’s so important. The declining revenues are occurring because of the problems of our past.”

But Senate Democratic Leader Steve Geller, of Hallandale Beach, said tough times are ahead for lawmakers trying to write a budget in which Crist has recommended millions of dollars in new spending.

Tax collections for the current budget year were put at $303.4 million less than expected by economists Monday. But because Florida will carry into next year $2.7 billion in reserves, the shortfall of tax dollars will not force lawmakers to impose any immediate budget cuts.

The slowdown in housing and related industries - Florida mortgage loan originations, home construction, the sale of related items as furniture, appliances and carpeting - figure into the decline in sales-tax dollars.

The Florida real estate market decline is also seen in a drop-off in the documentary tax dollars, revenue that comes from home sales. These taxes are expected to be down $27.6 million from this year’s anticipated level and $97.7 million next year.

On the other hand, some tax collections are up slightly, such as corporate income tax and the state’s insurance premium tax. But while this year’s overall tax collections are down compared with last year, next year’s dollars are expected to top the current year by about $700 million.

“Strength in the underlying Florida economy, along with population growth - related revenue increases and higher levels of personal income, bolster the rest of the estimate,” Baker said.