State Debt Could Threaten Government Programs
Even as talk of deficits and debt seem focused largely on Washington, Florida’s state government is cresting on its biggest tide of red ink in history.
Now, the $26.4 billion owed by state taxpayers may threaten several environmental, transportation and classroom spending commitments in the upcoming legislative session.
“We don’t manufacture money,” said Sen. Steve Wise, R-Jacksonville, chairman of the Senate’s Pre-K-12 budget committee. “We used to have a couple of billion dollars in reserves, and we’re eating them up. We’ve just got to quit spending.”
Wise likened the state’s finances to a recession-strapped family using their credit cards to get by. “There’s a day when you have to pay for it,” he said.
For some lawmakers that day may be nearing – spurred, in part, by Florida’s debt ratio hitting a record high 7.9 percent last year. The ratio reflects the amount of money lawmakers must spend each year as debt service payments in relation to available revenue.
The state’s Division of Bond Finance acknowledges the state’s debt has spiked, but officials there blame it partly on an imbalance that developed when state revenues declined sharply with the recession, Last year’s $66.5 billion state budget was $7.3 billion smaller than the spending plan approved three years earlier by lawmakers.
Still, the state’s debt payments continue to mount. Last year, the Legislature was forced to earmark $2.1 billion to maintain the state’s tax-supported debt – double the amount Florida taxpayers owed 10 years ago.
The big increase stems from the Legislature choosing to borrow rather than spend cash-on-hand for a number of big-ticket projects.
Debt has increased $9.6 billion in the past decade because of heavy school, college and university construction projects, highway spending, and environmental preservation programs.
When lawmakers convene this spring’s Legislature in March, the debt facing the state could heighten pressure on efforts to revamp the state’s class-size amendment and revive the Florida Forever land-buying program, which Gov. Charlie Crist recommended restoring with $50 million in cash.
Florida Forever stalled last year when lawmakers couldn’t come up with the money and refused to add to state debt by bonding for the program. Crist found the cash for in his $69.2 billion budget proposal, but only after he fortified the spending plan with cash from a Seminole Tribe gambling deal and anticipated federal stimulus that some lawmakers fear may not come to fruition.
Crist also set aside a modest $250 million in budget reserves, which lawmakers last week hinted could threaten the state’s bond rating with Wall Street agencies. Legislative leaders indicated they want to tuck aside more money in reserves, to blunt the possibility that Florida’s bond ratings could be lowered – costing the state even more in debt service.
“The governor apparently sees numbers that many others don’t see,” said Sen. Don Gaetz, R-Niceville, who is wary of adding to the state’s future debt – while also positioning himself as a future Senate president.
Gaetz is using fear of the mounting debt as one of the reasons for revisiting the state’s 2002 class-size amendment. Gaetz wants voters in November to reconsider their eight-year-old vote and relax limits to reduce the need for building dozens of more schools to meet per-classroom standards that kick-in this fall.
“You’re going to hear that argument about reducing debt,” said Rep. Marty Kiar, D-Davie, who opposes the class-size overhaul. “But if we don’t have a good education environment, that’s what’s really going to lead to the economic destruction of this state.”
Eric Draper, lobbyist for Audubon of Florida, said that even if Florida Forever money had to be borrowed, the additional cost to the state’s debt level would prove modest. But he acknowledged that the tight-fisted mood in Tallahassee could scuttle the program again.
“We know that the House, especially, will look for reasons not to fund Florida Forever,” Draper said.
Additional bonding that may be needed to help finance high-speed rail between Tampa and Orlando and the Central Florida SunRail commuter train also could prove a tough sell among lawmakers fearing more red ink.
Along with the state’s $26.4 billion in debt, another $14.7 billion in “indirect debt” also hangs over the Legislature. Indirect debt is money owned that is not backed by state revenue, stems from the borrowing of Citizens Property Insurance Corp., and the Florida Hurricane Catastrophe Fund Finance Corp.
“The state has to live within its means,” said House Speaker-designate Dean Cannon, R-Winter Park. “We can’t just get by running up debts.”