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State's Economic Woes Nailed by 2005 Forecast
State's Economic Woes Nailed by 2005 Forecast

A dire prediction of a flat-lining economy for Florida, released two years ago this fall, has turned a team of university professors into some pretty sharpshooting soothsayers.

In their October 2005 release of Tough Choices: Shaping Florida's Future, Florida State University political scientist Carol Weissert and University of Florida economist David Denslow predicted severe weather ahead on the state's economic horizon.

The nonpartisan report, commissioned by FSU's LeRoy Collins Institute, sounded the alarm that the state's booming sales of high-priced housing, a primary force behind the extended economic expansion up to that time, would begin to dry up, creating a revenue drought and a shortfall in funds to cover government-funded services and programs. Further, constitutionally mandated spending on class sizes and pre-K would cloud fiscal forecasts in the ensuing years. The report's bottom line: The time had come for Florida to face some hard realities and make some challenging choices.

But the report essentially fell on deaf ears as the state's economy continued to roar, fueled by a seemingly bottomless gas tank of sales tax revenues largely derived by a booming housing market.

No one called it the Chicken Little report—at least not out loud—but with its timing, some politicos surely were tempted to. A few weeks after the release of Tough Choices, the state's Revenue Estimating Conference identified a $1.7 billion surplus, a windfall from higher-than-expected sales tax collections.

But then came the proverbial dawn. When the state closed its fiscal 2007 books last June 30, figures showed the state $380.5 million in the red, with projections of a $1 billion revenue shortfall for fiscal 2008. Suddenly, the party was over, and alarm bells are still clanging, with a special budget-cutting legislative session set for this October.

The debacle was no surprise to the drafters of the 2005 report.

“It looked like we were naysayers and off the mark,” Weissert said. “But (now) it looks like we were exactly right on.”

If anyone cared to pay attention, all the indicators were there, suggested Curt Kiser, former state senator and chair of the Collins Institute board.

“It really was the housing industry at an all-time high…and insurance payouts from two years of back-to-back payoffs [for hurricane damage]—that's what was keeping the state afloat at record surpluses coming into the treasury,” Kiser said.

Having spent two decades in the legislature, Kiser said he knew firsthand about the economy's inescapably cyclical nature, and so he wasn't surprised the report showed that the boom times weren't going to last. “Once the housing bubble burst and insurance payouts slowed down, our economy was going to look a lot like the others: flat,” he said.

Two years ago, Tough Choices prescribed six measures to address the challenges Florida faces to pay its bills. The suggestions included creation of an official commission to continue studying the demands of an ever-growing population on the state's tax structure; a comprehensive examination of Medicaid; modification of the class-size amendment; adjustments in sales tax policies including extending the sales tax to Internet sales; seeking innovations and savings in services the state provides; and cessation of any added tax breaks for retirees.

“The recommendations were pretty tough,” Weissert admits. “People didn't think we needed them because we had lots of money.”

It's time to take another look at the bleak situation, Weissert said. She and Denslow are releasing another forecast with updated data and new analyses this fall, again supported by the DuPont Fund.

Perhaps this time around, lawmakers will be more inclined to pay heed to Florida's best economic fortune-tellers. —M.M.W.

To read the original Tough Choices report or the October update, please visit the LeRoy Collins Institute Web site at www.fsu.edu/~collins.