Florida. economy improves, but fragile

TALLAHASSEE, Fla. – Sept. 15, 2010 – Florida’s budget picture is improving but remains shaky, with unemployment expected to climb through the autumn and foreclosures still outpacing home sales, a legislative budget panel was told Tuesday.

Analysts reduced next year’s anticipated budget shortfall to $2.5 billion – down from a $5.5 billion gap for 2011-12 that was projected last year. But the red ink will continue to course through Florida’s spending plans for the next three years as federal stimulus dollars dry up, Medicaid costs climb, and the economy remains fragile, analysts said.

“We know the recovery is going to be uneven – with a lot of ups and downs,” the Legislature’s chief economist, Amy Baker, told the Legislative Budget Commission (LBC).

The LBC formally adopted the three-year budget outlook presented by Baker and compiled by analysts and economists from several budget and policy committees. The outlook effectively serves as a guidepost for lawmakers, based on what analysts say are “events that are known or likely to occur.”

Baker conceded, however, that some potential budget factors remain difficult to gauge. The financial impact of the Deepwater Horizon oil spill was not included in Tuesday’s forecast, but Baker counseled that preliminary estimates show that its impact on Florida’s economy is “not going to be some of the huge, frightening numbers that came out after the disaster.”

Other potential high-impact events include the possibility of a spate of commercial real estate defaults triggering bank failures. Thirty-seven Florida banks have collapsed in the past 18 months, Baker said.

Hurricanes and the prospect of a double-dip recession also are on state economists’ watch list.

The downsized budget gap for next year is credited to the role of federal stimulus dollars, years of budget cuts, and the arrival of Indian gambling money. But it also prompted sharp-edged questioning from Rep. Ron Saunders of Key West, designated as the incoming House Democratic leader, aimed at Republican gubernatorial candidate Rick Scott.

Scott opposes the federal stimulus dollars, which poured $2.5 billion into the state’s current, $70.2 billion budget. State spending also was eased by $855 million in enhanced Medicaid spending approved this summer by Congress and distributed Tuesday by the LBC across five major health programs.

Scott also has called for eliminating the state’s corporate income tax, which is on track to bring $1.8 billion into next year’s budget.

“I think it shows Rick Scott’s lack of understanding about how the state budget works,” Saunders said.

Scott’s campaign spokeswoman, Jennifer Baker, has said the Republican candidate is a political outsider with a “proven track record of creating jobs, balancing budgets.”

Democrat Alex Sink has outlined a more sweeping “government reform and accountability plan” that she says would yield $700 million in first-year spending cuts. The reductions, however, may prove inflated since many of the changes she proposes are confined to such steps as reducing state office space, eliminating unneeded layers of management, and bolstering the state’s hand in contracting.

Whoever is elected governor in November is almost assured of facing a still-bleak economic outlook, according to details presented Tuesday by Baker.

Florida’s 11.5 percent unemployment rate – two percentage points above the national average – is expected to tick upward in coming months, analysts said, based on formerly discouraged workers returning to the job markets amid some signs of improvement.

Two regions of the state, Cape Coral/Fort Myers, and greater Orlando, remain in the nation’s top 10 for the number of foreclosure filings – with Florida second in the nation, overall. Median home prices in the state are 22 percent below the national average, a level that has helped spur sales and may eventually contribute to the economic recovery, Baker told lawmakers.

Still, amid the rising home sales there are ominous signs, she warned. Fifty-percent of Florida home sales are currently being conducted by banks on foreclosed properties or on quick, lower-priced “short sales,” Baker said.

Source: News Service of Florida, John Kennedy

Carmen Bongiovanni, e-pro
Watson Realty Corp
386-246-9239
http://CarmenAndGeorge.com