TALLAHASSEE -- After a three-year boom that overflowed Florida's tax coffers, the state's economy is cooling. That means a tight budget year ahead for lawmakers.

The $71.2 billion proposed spending plan Gov. Charlie Crist sent to the Florida Legislature for the next fiscal year, starting July 1, is $2.4 billion, or 3.3 percent, less than the current budget.
 

The last time lawmakers faced such a budget squeeze was in the aftermath of the Sept. 11, 2001, terrorist attacks that depressed the state's tourism industry.

"Reality's going to set in,'' said Lisa Carlton, the Senate's fiscal policy and calendar committee chairwoman.

That reality may get worse before lawmakers finish their work in the annual 60-day regular session beginning March 6. It's likely the revenue numbers Crist used in his proposed budget will be revised downward in late March or early April, when state economists hold their next semiannual revenue estimating conference, said Amy Baker, coordinator for the Legislature's Office of Economic and Demographic Research.

"The numbers out there now are the most optimistic scenario,'' Baker said. "It's not going to get any better.'' The budget includes two major kinds of money coming to the state.

Lawmakers have little discretion over trust fund money usually earmarked by law for specific purposes such as utility taxes that pay for school construction and gasoline taxes for roads. Trust funds also include federal dollars channeled through the state for such programs as Medicaid.

The Legislature focuses mainly on general revenue that lawmakers can spend as they see fit. The largest sources are sales and corporate income taxes. General revenue is projected at nearly $28.16 billion for the coming year _ $1 billion more than the current fiscal year.

But Crist has proposed $161 million in tax cuts, including another year of sales tax "holidays'' for hurricane preparation, back-to-school and energy-saving items that would drop that $1 billion-revenue bump to $877.7 million.

That's still up 3.2 percent from the current budget. It's a much smaller increase, though, than the state had in the previous three years when general revenue increased by 9.2 percent, 14.4 percent and 8.4 percent.

Florida's population, meanwhile, is expected to keep growing by about 2 percent annually. That means almost 400,000 new residents _ equivalent to a city nearly twice the size of Orlando _ will need government services in the next fiscal year. Revenue growth is closely linked to the real estate market and construction, Baker said.

Florida's construction industry posted double-digit increases during the same three years that the state's revenues were booming. It was part of a national trend that affected Florida more than most places, Baker said. She said the state has had boom and bust cycles before, but none with such a high extreme in a long time.

The cycle now is headed down. When state economists made their last revenue estimate in November they predicted construction spending would fall 22.4 percent in the current budget year and another 3.6 percent in 2007-08. It now appears the decline has been greater than they expected, but a new estimate won't be made until the conference holds its spring meeting, Baker said.

The figures then likely will be adjusted, she said. The revision would mostly affect sales, documentary stamp and intangible tax collections, which are linked to construction or mortgage activity, Baker said.

Revenue estimates also have been affected by tax cuts enacted in recent years.

The estate tax that brought in $726 million in 2001-02 has declined steadily while being phased out. It is projected at only $3 million in the next budget year.

The intangibles tax on stocks and bonds also has been phased out _ the final payments were collected last year _ but Florida still levies it on obligations secured by real estate mortgages.

Overall intangible collections, driven in part by the real estate boom, peaked at just over $1 billion in 2005-06, but currently are only estimated at $624.5 million for the next budget year.

The tight budget "gives us as legislators the opportunity to go back and just to re-evaluate some (spending) decisions that have been made,'' said Carlton, R-Sarasota. "The committees really haven't had to take a long hard look at the recurring base since 9-11.''

The Senate Transportation and Economic Development Appropriations Committee, for example, is taking a three-year look back at every line item for which it is responsible, said Senate Majority Leader Daniel Webster, R-Winter Garden. "When we had money, we have spent let's say 20, 30, 40 percent more the next year, which was just something we could do then, but it may not have been necessary,'' Webster said.

Legislators, though, anticipated the looming decline and took some steps in last year's budget to soften the blow by holding $2.5 billion in reserve. Crist has proposed keeping $2.35 billion in reserve in 2007-08.

Lawmakers last year also spent general revenue for some major one-time spending items that will not be included in the new budget. Examples include a bailout of the state-created Citizens Property Insurance Corp. due to hurricane losses and a massive environmental lands purchase.

"That's going to make the budget more manageable,'' said House Budget Council Chairman Ray Sansom, R-Destin. "We knew that could happen.''

The Legislature will work off Crist's budget recommendations, which have drawn mostly rave reviews. Democrats, however, say Crist hasn't allocated enough money for the state's KidCare health insurance program and pre-kindergarten schools.

Major proposals in Crist's recommended budget include a $500, or 7.3 percent, increase per student for public schools; a 2.44 percent pay raise for state employees; $32 million for voting machines that leave a paper trail; $20 million for non-embryonic stem cell research; and a $100 million, or one-third, increase in spending to buy environmentally sensitive lands.

"Overall, the initiatives he's outlined and the priorities of the Florida House are very close,'' Sansom said.

http://www.orlandosentinel.com/news/local/state/orl-bk-budget022407,0,1705174.story