Florida Housing Market Blamed For State’s Budget Woes
Sunshine State residents are spending less on just about everything - from cars, to furniture and home additions - and it’s due to one main reason: the slumping Florida real estate market.
State economists painted a grim portrait of the state’s finances Wednesday, saying the misfortunes of the Florida housing market are to blame for a $1.5 billion projected state budget shortfall.
The deficit has prompted what could be an ugly special legislative session in September in which lawmakers plan to close the spending gap by making deep budget cuts.
There is enough in reserves now to cover the shortfall, but if legislators don’t act now, they could be confronted with an even larger budget problem in the spring.
“The bottom line is that we are in an ongoing correction in Florida’s real estate markets,” Rep. Ray Sansom, a West Florida Republican and the House’s budget writer, said.
“Though the revenue revisions will pose major state budget challenges, we must stay focused on the longer view. This slow period will eventually end and normal growth will resume. Now more than ever, we must maintain fiscal discipline.”
Florida legislators passed a $71 billion state budget earlier this year, but the state’s sales tax collections have not kept pace with projections made by state economists last March.
Local governments have experienced similar problems as property tax revenues have declined as well. Though the state’s sales tax revenue drop has proven to be more unexpected.
Their estimates, agreed to at a meeting of the Revenue Estimating Conference, show that tax collections are about $380 million below estimates for the 2006-07 fiscal year that ended on June 30 and down another $1.1 billion for the fiscal year that started July 1.
The principal problem, state economists said, is that home construction and sales of homes have dropped below the slump they had anticipated.
In addition to Florida mortgages and home sales, a sluggish housing market has eroded consumer confidence and dragged down sales of cars, furniture and other items. Economists warned this continue until early 2009.
“We think people are hunkered down,” said Amy Baker, coordinator of the Office of Economic and Demographic Research. “They don’t feel as wealthy. They stop buying things.”
And you don’t have to be a genius to know that as fewer people apply for Florida home equity loans or Florida home improvement loans, that’s another large sum of money that doesn’t ripple through the state’s economy.
The booming real estate market that left Florida tax coffers flush earlier this decade has meant lawmakers have some unspent cash that can cushion the shortfall.
But rather than dip into the surplus, the GOP-controlled Legislature plans to go ahead with budget cuts this fall to avoid the need to cut next year’s budget when lawmakers meet in regular session this spring.
SOURCE: Miami Herald
