Florida max's out it building fund for schools
By James Call
Tallahassee, FL – -Tremors from the Great Recession continue to be felt at the state capitol. The governor and the cabinet today/Tuesday received a report about the state's debt level James Call tells us, the state has reached its limit on the amount of money it can borrow for school construction.
Ben Watkins the director of the state division of bond finance walked the cabinet through the constitutional restrictions on how Florida floats bonds to pay for school construction projects. Florida's debt service cannot exceed 90 percent of expected gross receipt tax collections. The tax placed on utilities flat-lined in 08 and is not expected to start growing until 2013 at the earliest. Projects approved the past three years have brought the fund to its debt limit. Watkins' presentation led to this exchange with Governor Rick Scott.
Scott: "If interest rates don't go up gross receipts stay where they are, we only have a 10 percent cushion."
Scott: "So, think private companies would do that? 10 percent, 10 percent cushion."
Watkins: "Municipal entities are fully leveraged governor. I would have to say that would be fully leveraged. And that's what we see here today. When we get to the end of the story, gross receipts tax are fully leveraged, relative to the limitations that are embedded constitutionally."
This is playing out in school districts and on college and university campuses in a dramatic way.
Lawmakers put money for construction of school facilities into the Public Education Capital Outlay fund, known as PECO. In 2008, the Legislature approved about 1.8-billion dollars for new projects. Last year the figure dropped to 731 million dollars. February, the PECO estimating conference drastically reduced its forecast. No bonded projects are expected to be included in the budget lawmakers are working on for the next fiscal year.
"And that is because of the flattening out of the, actually the reduction of gross receipt tax collections in the current year. Over what had been previously collected."
"So, can I ask you a question? So does everyone understand that there's no-- I guess this money goes for what K-12, Universities Community Colleges everybody understand there is no money?I mean is that common knowledge?"
" Yes. And there has been the wringing of hands and knashing of teeth over that issue. Yes sir."
The recession that began five years ago hit at the heart of some of the bigger producers in Florida's economy -- housing, development and tourism. The slow down in economic activity led to less money in taxes and fees flowing to Tallahassee. Lawmakers have been cobbling together state budgets every year since 2007. In the education sector, that included borrowing against expected tax collections. This year the PECO Fund hit its limit. Watkins said looking at the circumstances now, the strategy to deal with the recession's impact on Florida's finances may appear to have been short sighted but then he said, the thing about hindsight is that it makes everything crystal clear.
"No one expected a drop in gross receipts tax. This never happened in 30 years. I mean after all we live in Florida where the grass grows in the winter. So, it's just a place we have never been before. That is having less revenue than we ever had before."