BRADENTON, Fla. — The Florida House Policy and Budget Council learned last week that revenues now are forecast to be $2.6 billion short of projections for the current budget and $3.6 billion less than anticipated for fiscal 2009.
Lawmakers also were told that due largely to declining revenues, the state has no additional borrowing capacity for the next three fiscal years beyond already authorized bond programs unless the Legislature votes to exceed its self-imposed cap on debt issuance.
“The reasons for this downturn in collections include a continued and longer-than-expected slowdown in the housing market, rising unemployment, high energy prices, turmoil in the credit market, and the increasing probability there will be a national recession,” Ray Sansom, chairman of the House Council, said in a letter to all state representatives on Wednesday.
“Unlike recent downturns in the U.S. economy, this time Florida seems to be worse off than the rest of the nation,” Sansom warned.
Ben Watkins, director of the state Division of Bond Finance, presented the 2007 Debt Affordability Report to the council. He said that the state is getting closer to hitting its benchmark ratio of debt service to revenues available to pay debt service. The Legislature, as a policy, targets 6% as the debt-ratio limit and 7% as the cap, but it can be higher if lawmakers vote to exceed those levels.
The ratio is projected to hit 5.99% in the current year. The ratio increased to 5.49% in fiscal 2007 from 5.10% in fiscal 2006.
“The significant increase in the debt ratio is not driven by what we did with respect to significant additional borrowing, but is impacted by or caused by simply having less money available to make debt service payments with,” said Watkins, who will present the study to Gov. Charlie Crist and his cabinet on Tuesday.
“The capacity within the 7% cap … serves as a cushion against further deterioration in the economy and further decline in revenues and should only be used for critical state needs and funding infrastructure,” Watkins advised.
But some members of the House Council indicated their interest in exceeding the debt limits in order to use bonding as a mechanism to stimulate the economy, particularly for advancing transportation and environmental projects.
However, there was concern about hurting the state’s credit ratings. Florida’s general obligation rating is AAA from Standard & Poor’s, AA-plus from Fitch Ratings, and Aa1 from Moody’s Investors Service.
Rep. Ron Saunders, D-Key West, suggested asking the state revenue-estimating conference to project the benefits of bonding as a way to move forward on projects that could stimulate Florida’s lagging economy.
“I don’t want to do something that would hurt us,” Saunders said. “If we can show that spending more money in certain programs would increase the state revenues to our budget, would the revenue-estimating conference numbers be something we could use to justify that increased bonding?”
Watkins said the state has a precedent for exceeding the 6% target ratio but not the 7% cap. When asked about bonds backed by tolls or user fees, he said those kinds of projects are not included in the state’s debt limits.
Standard & Poor’s analyst Robin Prunty said Friday it sounded as if Florida officials are taking a systematic approach to dealing with economic problems.
“Many states don’t go through that cost-benefit analysis. That’s more the exception than the rule,” Prunty said. “There are many states that issued bonds for economic development where there was no analysis of what the stimulation would be or even what the revenue impact would be.”
Prunty said her agency would consider “how onerous the debt service is relative to the budget,” and the status of the state’s revenues in reviewing any debt proposals. Standard & Poor’s affirmed its AAA rating and stable outlook on Florida Dec. 17.