BRADENTON, Fla. — President Obama and Vice President Joe Biden will be in Florida today to announce which states will share in $8 billion of federal stimulus funding for high-speed rail projects, and the winners will include the Sunshine State.
The news that Florida will be among the recipients comes as Gov. Charlie Crist prepares to present his budget proposal dealing with declining revenue that has resulted in the state exceeding its self-imposed debt cap.
Obama and Biden will announce the high-speed rail awards and their amounts at a town hall meeting they are hosting at the University of Tampa on Florida’s west coast. Thirteen high-speed rail corridors will receive funding, in addition to smaller awards for improvements to existing rail lines, according to White House officials.
Florida has applied for $2.5 billion in federal stimulus funds that will help the state build a high-speed rail system between Tampa and Orlando, and continue the necessary preliminary work toward eventually extending the rail system from Orlando to Miami.
“This will be one of the largest boosts to the state’s economy since [Walt Disney World], since the interstate highway system,” Sen. Bill Nelson, D-Fla., said in a release.
With more than one million Floridians out of work, Crist and other state officials hope building the rail stimulus will bring thousands of jobs.
The state’s unemployment rate reached a 35-year high in December, rising to 11.8%, which is nearly 2% higher than the national rate.
Crist has already announced that his proposed budget for fiscal 2011 will include $1.1 billion to support the state’s contribution toward construction of the Tampa-to-Orlando rail line, as well as planning of the Orlando-to-Miami segment, and to help fund a central Florida regional rail project known as SunRail. It is not yet clear if any of the state funding will be financed with bonds.
Crist, a Republican who this year is running for the seat being vacated by retiring U.S. Sen. Mel Martinez, plans to release his entire budget on Friday, a spokesperson in his office said yesterday.
So far, the only bonding Crist has announced is in relation to environmental programs. His budget will include $50 million for the Florida Forever bond program and $50 million in bonding for Everglades restoration.
Ultimately, though, it is the Legislature’s job to develop the budget and bond authorizations during its annual session that starts March 2 and runs through April 30.
In crafting spending plans, lawmakers will be guided by the state’s annual debt affordability study, which measures the ratio of debt service to available revenues.
The most recent study, which was released in December, concludes there is no available debt capacity in the next three years within the state’s 7% cap based on current revenue projections and existing borrowing plans.
In determining whether Florida can afford to sell more debt and in calculating estimated debt capacity, the Legislature each year targets a ratio keeping debt service at 6% of available revenue and imposes a cap of 7%. Lawmakers must determine if it is in the state’s best interest to issue additional debt that would exceed 6%. If new debt would result in debt service exceeding the 7% cap, the financing must address a critical state emergency.
“The message there is, we’re over the [ratio] level we would like to be but it’s not because of what we did on the debt side,” said the study’s author, Ben Watkins, director of the Division of Bond Finance. “It’s the precipitous decline in revenues precipitated by the declining economy. We’ve got less money.”
Revenue collections in fiscal 2009 were $26 billion, $3.7 billion less than the previous year. Revenue fell by $2.6 billion in fiscal 2008, and dropped by $700 million in fiscal 2007.
State economists have lowered estimated general revenue for fiscal 2010 by $1.3 billion, and for fiscal 2011 by $1.9 billion.
That means lawmakers will have yet another year of tough budget decisions. And it is a major election year.
Some of the revenue supporting specific bond programs is expected to very slowly start to rise in fiscal 2011.
However, the decline in revenue in fiscal 2009 pushed the state’s ratio of debt service to available funds to 7.91%.
In fiscal 2010, the ratio is projected to be 7.72% and in fiscal 2011 it is projected to be 7.76% before improving, the study said.
Florida’s total outstanding debt was $26.4 billion as of June 30.
Another $10.2 billion is expected to be issued over the next 10 years for all of the state’s currently authorized financing programs.
Despite rising debt levels and several years of declining revenues, Florida has managed to maintain its general obligation equivalency ratings of AAA by Standard & Poor’s, AA-plus by Fitch Ratings, and Aa1 by Moody’s Investors Service. But all three agencies have negative outlooks on their ratings for Florida.
Adequate reserves and structural balance will be key to keeping ratings at their current levels.
In fiscal 2009, lawmakers took $2.3 billion from reserves to offset declining revenue. At the end of fiscal 2009, the state had $912.7 million, or 4.3% of general revenue, in reserves, “which is considered low by rating agencies,” the debt affordability study said.
Reserves are expected to increase in fiscal 2010 to $1.3 billion, “which is at the low end of the range considered adequate by rating agency guidelines,” the study said.
“Clearly, the focus is on maintaining the state’s ratings in this debt affordability study,” Watkins said. “I expect that will be important to the Legislature and that will be considered in formulating the state’s budget.”
And that could have a major impact on how much debt lawmakers authorize in the next budget.
Florida is typically the largest issuer of the 11 states that comprise the Southeast region. Over the last 11 years, lawmakers have authorized an average of $1.67 billion of bonds each year.
“Probably [new debt for 2011] will be moderate relative to historical norms because the debt ratio is higher than we want it to be,” Watkins said. “I think there will be a hard look at any new bond proposals.”