BRADENTON, Fla. - Florida Gov. Charlie Crist considers himself an eternal optimist. He maintained that persona in his state of the state address Tuesday night, trying to put the best face on the state's economic woes as he presented plans for dealing with those problems during the 2008 legislative session.
"Florida's families and businesses are faced with extraordinary economic times - skyrocketing gas prices, the threat of foreclosure, and a softening housing market," Crist said. "And, like Florida's families, these challenging times will require us to meet the demands of declining revenues."
Crist, a Republican in his second year in office, said he and state lawmakers would tackle the problems.
"By keeping taxes low, creating jobs, and fueling an economy that ranks ahead of most nations of the world, we set a model at which others can marvel," he said.
The 60-day legislative session began Tuesday with lawmakers facing fiscal 2008 budget cuts of more than $500 million due to the lagging economy and sinking housing market. It will be the second round of cuts for this year's budget. Lawmakers expect to learn next week from the state's revenue forecasters that they'll start fiscal 2009 with some $4 billion less than what they had to spend this year.
Crist has proposed a $70 billion fiscal 2009 budget plan that taps reserves and relies on non-recurring funds for recurring programs, as well as funds from a tribal compact that is currently in a legal dispute. The governor also proposed authorizing more than $2 billion in new debt, including issuance of the state's first grant anticipation revenue vehicles, or Garvees.
"Fiscal discipline has afforded us financial reserves to invest in our future while balancing our budget during difficult economic times," Crist said. "We have reserves for times when we need them."
The governor said his legislative package sets clear priorities and outlines a comprehensive plan for moving Florida forward with increased funding for social programs, schools, economic programs, and funding for "sustainable natural resources."
"We must establish a successor to Florida Forever," said Crist, who offered no details on how he would extend the state's bond program that is used to buy land for conservation and recreation.
However, the idea has support from Senate President Ken Pruitt, R-Port St. Lucie. In remarks before the Senate on Tuesday, Pruitt said that the body would focus on creating a new program to extend the state's environmentally sensitive land purchase program into the next generation.
Florida Forever is a $3 billion, 10-year program whose authorization is set to expire in 2010. As of last December, the program had approximately $2.14 billion of outstanding revenue bonds secured by documentary stamp taxes on real estate transfers. Prior to Florida Forever, a similar program called Florida Preservation 2000 issued $3 billion of parity debt. Typically, both programs limited expenditures to $300 million per year.
Neither Crist nor Pruitt have said if they support a plan being pushed by a coalition of environmental groups that would enact a new, 10-year land-buying program beginning in fiscal 2009. The coalition's plan would use a combination of cash and bonding authority that would provide $600 million a year, for five years, increasing in fiscal 2014 to $900 million a year for the next five years.
"The debt service on the bonds is paid by revenue generated from the documentary stamp tax, which is appropriate because this funding is generated from real estate transactions and land sales," the coalition says.
However, documentary stamp tax revenues are plummeting because of the decline in real estate sales.
One thing is certain this legislative session: Florida lawmakers won't be dealing with massive problems in the variable- and auction-rate markets.
Florida lawmakers have only authorized one bond program to issue variable-rate debt and so far that program has issued $220 million of variable-rate Everglades restoration revenue bonds.
Just last week, Florida's Cabinet authorized refunding the debt because some weekly reset rates are spiraling upward in the wake of the liquidity crisis caused by downgrades of bond insurance companies.
Florida Division of Bond Finance director Ben Watkins said last week that the reset rate on $100 million of Series 2006 bonds insured by Ambac AssuranceCorp. reset at 7% on Feb. 19 and 6.5% on Feb. 12. Feb. 12 was the first large increase on the Ambac-insured bonds that Watkins said should have been resetting in the 2% to 3% range.
The state's remaining variable-rate debt, $120 million of Series 2007 bonds, is insured by Assured Guaranty Corp. It reset between 2.1% and 2.4%.
Watkins said he requested refunding authority for all the variable-rate debt but most likely would proceed with fixing the rate on the Ambac-insured bonds, which are experiencing the highest resets.
"We are in an enviable position with not having a lot of variable-rate exposure," Watkins said.
Florida does not have any auction-rate exposure.
While many questions remain about how lawmakers will deal with the state budget, there are overarching differences between the state's primary parties and inside the Republic party about solutions to budget cutting and jump starting the economy.
"As recently as a month ago, the governor seemed oblivious to Florida's lagging economy, even going as far to claim that it 'is going to continue to get better' despite the fact that economic indicators point toward an enduring decline," said Florida Democratic Party chairwoman Karen Thurman in a written response to Crist's state of the state address.
While Crist "seemed to finally recognize some of the challenges facing working families in Florida today, he failed to commit to real change. Small changes may help some people, but it's going to take big changes and hard work to help the majority of Floridians through this economic crisis," Thurman said.
Florida House Speaker Marco Rubio, R-West Miami, gave a dramatically different description than Crist about the current state of affairs.
"Our real estate market is in complete collapse. Florida is second in the nation in foreclosures. Three of the top 20 cities for foreclosures are in Florida," Rubio told members of the House on Tuesday. "Unless we act boldly, our economy will continue to be worse than the national economy."
He said the state must balance the budget "by living within our means. We should not spend money that we do not have."
Rubio called for "meaningful revenue caps at both the state and local level," as well as "transparency in government spending." He supports a ballot initiative under way that, if approved by voters statewide, would limit all property tax increases to no more than 1.35% of the property's taxable value.
Florida's general obligation credit is rated AAA by Standard & Poor's, AA-plus by Fitch Ratings, and Aa1 by Moody's Investors Service.