Falling Property Values Add to Fla. Budget Woes

Falling Florida property values may increase next year's state budget gap

Falling property values and a rising foreclosure rate may contribute to a growing gap in next year's state budget, the Florida Legislature's top economist said Monday.

State economists recently cut their forecast for 2009 property taxes -- based on the taxable value of properties for school purposes -- by about 5 percent since their last estimate in August.

The Legislature requires school districts to levy a minimum property tax rate -- this year about $5 per $1,000 of taxable value -- to qualify for state funding.

If lawmakers leave that requirement unchanged in 2009-10, it'll bring in nearly $462 million less than this year, said Amy Baker, coordinator of the Legislature's Office of Economic and Demographic Research.

That's in addition to a previously forecast $3.8 billion gap for the next budget year, which begins July 1, due to declining general revenue -- mostly sales tax. The gap is based on what it would take just to keep existing programs going and pay for other "musts" such as Medicaid, public schools and prisons.

"It certainly produces a lot more stress for the budget writers," Baker said.

Lawmakers' options are to increase the required school tax rate, put more state money into public schools, cut education spending or a combination of those alternatives, she said.

The situation is expected to get even worse in the next two years. With the same required tax rate, the shortfall would be $604.5 million in 2011 and $731 million in 2012.

Dropping home prices and the growing number of foreclosures are two major factors driving down the property tax forecast, according to an executive summary accompanying the estimate. It notes a third-quarter estimate by the Office of Federal Housing Enterprise Oversight showed Florida's homes dropped 16 percent in value compared to the same period last year.

October statistics from the Florida Association of Realtors showed a 24 percent drop in value compared to the same month in 2007.

Foreclosure filings are estimated at up to 360,000 for this year, double the number in 2007 and four times as many as six years ago.

The new property tax estimate will not affect the current state budget, which has its own problems. The latest forecast is for $2.3 billion deficit.

House and Senate budget committees this week will be discussing what to do about the current year deficit and next year's growing budget gap.

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