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Tallahassee, FL – Florida's financial picture isn't as bad as analysts predicted. A report forecasting the state's budget outlook for the next three years was released this week. It considers unemployment, the housing market, and population growth, but Gina Jordan reports it doesn't include possible fallout from the BP oil spill.
The long-range financial outlook is the culmination of work by dozens of individuals and committees. It was presented to the Legislative Budget Commission by Amy Baker, staff director of the Office of Economic and Demographic Research.
"We know the recovery's going to be uneven, that it's going to have many ups and downs," Baker said. "If you follow the stock market, that's very clear - up 200 points, down 400 points with very little intervening news in a way. We're going to see a lot of that - retail sales that look good one month, down another month. But that's to be kind of expected for where we are at this point."
The gaping hole analysts thought they would see in next year's budget didn't surface, but it's still projected to be about $2.5 billion. Since that's the same amount of federal stimulus funds in the current budget, that had Rep. Ron Saunders, the incoming House Democratic leader, wondering.
"So the deficit has been reduced from $6 billion, which we had, the last meeting I guess we talked about to about $2.5 billion. How much of that decrease in the deficit do you think can be attributed to the federal stimulus dollars?," Saunders asked.
Technically none, Baker told him, since that money is built into expenditures, not general revenue. The outlook shows the unemployment rate will continue to tick upward. It rose two tenths of a point in August to 11.7 percent. But it's expected to stay below March's peak of 12.3 percent. Baker calls the jobless rate
deceptive as a measure of what's really going on because more people are optimistic enough to start looking for work again. And the job creation picture is slightly better than it was this time last year.
"Essentially our decline has stopped and slowed till we're just about flat with the latest data, which was July," she said. "And even though that's good news that's moving in the right direction, since the peak during the boom, we've lost somewhere around 831,600 jobs in Florida."
At our current pace, Baker says, the state will not recover the jobs lost during the recession for at least another four years, while Florida is on track to becoming the third most populated state, breaking the 20-million mark by 2015. That's an addition of about 600 residents a day who could boost existing home sales.
"The peak sales price we had for median homes in Florida during the boom was 257,800," said Baker. "By the most recent data in July, it dropped to 138,000 as the median sales price in Florida."
That's a decline of about 46.5 percent. In May, about half of all the homes sold in Florida were either bank sales or short sales, meaning mortgages in distress.
"In terms of looking at foreclosures and what we call the shadow inventory, which are people that are delinquent on their payments, we are number one in the country."
Baker says the economy probably started its rebound between April and June, and the recovery will be slow. It doesn't help that the credit market is still sluggish and difficult to access.
"But the Florida recovery is going to be led by the, ultimately, the low home prices," she said. "It's also going to be related to the population growth that we can anticipate coming back in, in the household formation, but also Florida's unique demographics and the aging of the baby boom population."
What the report doesn't take into account is the effect of the BP oil spill in the Gulf. We'll know more in the fall when the spill is factored into the forecast. Then there are those events that aren't likely to happen but will have a big impact if they do.
"There's three that we are really tracking at this point in time," she said. "One is what's happening with commercial real estate and local bank failures, which are the state chartered banks. We know since 2002, 42 banks have failed, but 37 of those 42 banks have occurred in just over the last 18 months."
The other two potential troublemakers are major hurricane strikes and a double dip recession. The report recommends a minimum reserve balance of around $500 million in each of the next three fiscal years, when the budget gaps are expected to be $2.5 billion, $2.8 billion and $1.9 billion respectively.