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Housing slump may force Florida to make $2 billion in budget cuts

TALLAHASSEE, Fla. – Aug. 28, 2007 – Facing the worst budget crunch since the 2001 terrorist attacks devastated Florida’s tourist economy, state legislators on Monday were told they might need to slash state spending by more than $2 billion over the next two years.

Florida’s bleak housing market is the culprit, forcing a dramatic drop in state revenues collected through sales taxes and real estate transactions.

This week legislators have begun the task of looking to slash $1.1 billion out of the $71 billion state budget that took effect on July 1. Those cuts will be finalized during a three-week special session set to begin on Sept. 18.

It’s anticipated the Legislature will have to trim up to another $900 million next spring when it must put together the next state budget.

Among the possible cuts in coming months are state spending on nursing home and hospital care for the poor. Also, university students could face higher tuition as soon as January and people who use state programs, such as parks, could be facing higher fees to make up some of the money.

Senate committees will look to cut 4 percent in the major areas of state spending, such as education, social services and education, mostly through across-the-board cuts.

“These cuts will be very tough, but our goal is to affect the least amount of people,” said Senate Ways and Means Chairwoman Lisa Carlton, R-Osprey.

House leaders plan to target specific programs and are hoping to spare public schools from the brunt of the cutbacks, which could reach $700 million.

“It’s all tough ... but we’ll make education a priority,” said House Budget Chief Ray Sansom, R-Destin. “There will be some reductions [in schools], but they will be reasonable, not drastic changes.”

State spending has been buoyed in recent years by the state’s housing boom and hard-hitting back-to-back hurricane seasons in 2004 and 2005. The storms caused billions of dollars in damage, but also fueled a rebuilding effort that boosted sales tax collections by billions of extra dollars.

“It’s either boom or bust,” said Sen. Gwen Margolis, D-Sunny Isles Beach.

For the past few years it was hurricanes that “made the budget work,” Amy Baker, the state’s chief economist, told legislators on Monday. “But you can’t rely on that ... to bail you out again.”

She said estimates that the state will be short $2 billion in recurring revenues from tax sources are “conservative.”

And in the midst of this financial crisis, the state over the next three years is facing some big increases in ongoing programs, including another $2.4 billion for increased student enrollment and smaller class sizes in public schools, an increase of $1.6 billion for Medicaid expenses, $1 billion more for state employee benefits and salaries, and $800 million to build more prison beds and operate the corrections system.

But Sansom voiced confidence the economic outlook will improve.

“While it looks gloom and doom right now, I’m not sure it’s going to stay that way ... I think the real estate market is on the brink of breaking wide open if insurance and taxes become more affordable,” he said.

Copyright © 2007 South Florida Sun-Sentinel, Linda Kleindienst. Distributed by McClatchy-Tribune Information Services.