A newly released Study today by the Pew Center, a non-partisan fact tank that provides information on issues and trends shaping America, says that while California’s fiscal problems are in a league of their own, it is hardly alone.
The Study entitled Beyond California: States in Fiscal Peril, notes that, the same factors driving California toward the brink of insolvency, are hurting several other states, including Florida. The others are: Arizona, Illinois, Michigan, Nevada, New Jersey, Oregon, Rhode Island and Wisconsin.
While not a comprehensive diagnosis of states’ fiscal health, the Study looks at 6 indicators to understand why some states are suffering more acutely from the current economic crisis than others. These indicators include: Change in revenue; Budget gap as a percent of general funds; Change in unemployment and the Foreclosure rate.
Particularly regarding Florida, the Study notes that, Florida’s population is shrinking for the first time since World War II, a disturbing trend for a state that has built its economy, and structured its state budget, on the assumption that throngs of new residents will move to its sunny shores each year.
“The Great Recession has not just stalled Florida’s growth—it has reversed it. In 2005, Florida ranked second among the states in economic growth. In 2008, it ranked 48th. Not too long ago, Florida was adding as many as 445,000 residents a year; in contrast, between April 2008 and April 2009, its population actually shrank by 58,000″, the authors of the Study point out.
Just as troubling for Florida is what’s happening with state and local budgets. During the housing boom period, the state coffers expanded dramatically. Now, the State, more likely than not, will face a budget crunch in 2011, what with a looming deficit as high as $2.6 billion.
According to the Report, this is uncharted territory for a state whose conservative budgeting practices, constitutionally required reserves and go-go economy largely have kept it out of fiscal trouble for the better half of the past century.
The Report warns that there are few options for righting Florida’s budgetary shortfalls and for balancing its budget, given that there is no income tax and per-capita spending on education and social services is already low.
Just as housing was the key to Florida’s boom, according to the Report, it will also pose the biggest obstacle to recovery in the long-term.
Florida’s housing market is in worse shape than California’s and is expected to take longer to recover, according to forecasts by Moody’s. “Foreclosure rates are still rising in both states, but they’re rising with no slowing whatsoever in Florida, while they’re really starting to slow a bit in California,” said Marisa DiNatale, a senior economist at Moody’s.
But perhaps all is not lost.
“Florida is a very welcoming place. I don’t think Florida is over, like the articles calling us the ‘Sunset State’ have been saying,” says, Dominic Calabro, President and CEO of Florida TaxWatch. “But this is more than just a temporary lull.”
