State lawmakers will have about $71.3 million of breathing room when they begin crafting the budget for the coming fiscal year, according to forecasters, but some legislators are already beginning to wonder how long the good news will last.
Amy Baker, coordinator of the Legislature’s Office of Economic and Demographic Research, told the Legislative Budget Commission on Wednesday that current forecasts would give the state enough money to cover expected spending and have some money left over for the 2013-14 fiscal year, after years of lawmakers facing shortfalls that often ran into the hundreds of millions of dollars.
But the relatively small amount of money, in the context of a state budget of close to $70 billion, left lawmakers looking warily at the numbers as they prepare for the 2013 legislative session. Forecasters produced similar sunny projections last year but quickly started downplaying them when the economic recovery began to slow.
“It is very good news in terms of the fact that there’s no budget gap, but we would give you the warning that there’s not much of a cushion there,” Baker said Wednesday.
There are also still risks to the fragile recovery, Baker said. There is still the potential for a monetary crisis in the European Union, which could plunge the global economy back into recession. In Washington, D.C., President Barack Obama and Congress — and potentially a President-elect Mitt Romney — have until the end of the year to come to a wide-ranging deal on spending and taxes before the nation plunges off a “fiscal cliff.”
That cliff is the result of a combination of automatic spending cuts and tax increases that economists say could cause the economy to slow again unless they are better managed.
“It’s better, but we’re not out of the woods yet,” said outgoing Senate Budget Chairman JD Alexander (R-Lake Wales)”I wish we were.”
There were also potential problems with state spending, lawmakers said. Some are concerned that the cost of the state-federal Medicaid program, which provides health-care services for the poor, could grow quicker than forecasters expect.
“Unless we can get Medicaid costs to a predictable level, and we haven’t done that yet ... we will very likely find ourselves not in a plus position of a marginal amount but in a negative position yet again,” said incoming Senate President Don Gaetz (R-Niceville).
Alexander also said tepid growth in the state’s pension investments could force the state to provide more money to cover liabilities in that fund, draining dollars away from other programs. He noted that the pension fund is lagging behind the return rates that it generally expects, and the state’s obligations are still less than 90 percent covered.
“It does make me wonder whether or not we’re really going to close that gap,” he said.