TALLAHASSEE, Fla. – March 12, 2008 – Florida is likely to take in about $3 billion less in tax collections this fiscal year and next than previously expected, foreshadowing a brutal session in budget-chopping during the coming weeks.

High energy costs, a failing housing market, a weak credit market and other dark economic forces are combining to drive down general revenue, said state analysts who broke the bad news late Tuesday.

That means lawmakers will face a shortfall in 2008-2009 of somewhere between $3.1 billion and $3.2 billion in general revenue needed just to maintain the current level of state services, said Ray Sansom, chairman of the House Policy and Budget Council.

That assumes, he said, that Gov. Charlie Crist approves the $512 million package of cuts for the current fiscal year that lawmakers negotiated last week and are poised to adopt. If those cuts to education, health care, the courts and other areas take effect, lawmakers will have enough money in reserve to cover expenses without having to slice again into the 2007-2008 budget.

If those reductions do not take effect, “we would violate the Constitution because we would be in a deficit … by the time the fiscal year is over,” said Sansom, R-Destin. “That’s how critical that vote is.”

Tuesday was the fourth time the state’s economic analysts in the executive and legislative branches have revised their forecasts for the current year. Though predictions of plummeting revenue spurred lawmakers last fall to trim more than $1 billion from the budget, analysts have continued to predict worsening shortfalls.

While economic growth is expected to improve in late 2008-2009, said Amy Baker, director of the state Office of Economic and Demographic Research, “revenue collections are not anticipated to exceed the fiscal year 2005-2006 level until fiscal year 2010-2011.”

Tuesday afternoon, House Speaker Marco Rubio characterized Florida’s situation as “an economic crisis” not a “budget crisis.”

“These budgetary numbers that you are seeing today are a reflection of an economy that’s suffering, not a government that’s suffering,” Rubio told reporters. “This is a symptom of a larger disease, which is a national economic downturn which is disproportionately affecting Florida.”

Rubio said he was wrong last week when he warned lawmakers on the opening day of session that “Floridians would wake to the news that we have $4 billion less than we thought we would have, just a year ago.” Turns out, he said, “it’s $4.5 billion less.”

Corporate taxes scrutinized

Florida’s freefalling revenue has lawmakers in both parties pushing strategies for shoring up the budget. But the philosophical divides between them more or less guarantee little bipartisan agreement on a solution.

Reminiscent of Democrats in Congress pushing to sunset President George W. Bush’s tax breaks, Democrats in Tallahassee want to end sales tax exemptions and close what they call loopholes in the corporate tax system.

House Minority Leader Dan Gelber, D-Miami Beach, wants to prevent multistate companies from sheltering the profits they make in Florida in tax haven states like Delaware, where there is no corporate income tax. Doing so, Gelber says, would net Florida $400 million a year.

“We’ve got a serious deficit right now that isn’t going to be solved by simply saying we have to live within our means,” he said. “We’re dealing with, actually, health care and core public education issues.”

Gelber’s corporate tax plan will get a hearing in the House, Rubio said, but panned the general notion of increasing the tax burden on businesses.

Florida government will have to prioritize spending, Crist said Tuesday. “We have to tighten our belt just like Florida families do every day.”

Tap Reserves, Crist Says

But he continued Tuesday to urge lawmakers to tap into state reserves in order to avoid painful cuts, a proposal that many Democrats also support. Florida’s reserves include an emergency “budget stabilization fund” of $1.3 billion, which lawmakers would have to pay back within five years if they tapped into it.

Sansom and Rubio said tapping the state’s reserves would be irresponsible given the predicted duration of the economic downturn.

Every time one-time dollars are spent on recurring programs, Sansom said, “It just increases the reductions you have to make the next year, or the next year, or the next year.”

Rubio was more blunt. Spending reserves “is politically expedient; it’s an easy way out of this session,” he said. “It sets up the Legislature and the state of Florida for horrifying consequences as early as next year.”

Senate President Ken Pruitt released a statement calling Florida’s revenue drop-off “a very serious situation” but warned that “we must not take financial shortcuts in order to avoid the political heat that budget reductions will bring.

“We are going to need everyone to pull together to get through these difficult times,” he said. “Florida’s economy has been robust, and I believe once we weather this correction period, we will see those prosperous days again.”

Copyright © 2008 Tampa Tribune, Fla., Catherine Dolinski. Distributed by McClatchy-Tribune Information Services.