Florida’s public higher education funding crisis is only the tip of the bad budgeting iceberg. The legislature’s failure to find adequate revenue for basic operating costs and long-term savings may soon result in a lower statewide bond rating.
Last week, Moody’s Investors Service placed Florida on its watchlist for a possible credit rating downgrade. In explaining the decision, it referred to: “the negative credit impact from a precipitous drop in revenues brought on by a protracted and deep dislocation in Florida's real estate market as well as the current recession.”
The company also stated that the watchlist action “reflects the continued decline in employment and personal income, relatively flat population growth and net migration.”
If Florida’s bond rating is downgraded, the state government will have to pay much more in interest whenever it borrows money. Taxpayers will have to cover those increased costs while receiving fewer state services due to budget cuts.
Moody’s said that Florida could improve its standing through:
-Restoration of a high level of reserves.
-Adherence to structural budget balance while also absorbing spending pressures.
-Adoption of a budget with less dependence on nonrecurring solutions coupled with a plan to restore reserves over the mid-term.
Rep. Dean Cannon (R-Winter Park), chief budget negotiator for Florida’s House of Representatives, claimed the watchlist news gave further evidence showing why the Senate should agree to more spending cuts that will go into the state’s reserves.
However, Moody’s Vice President Mark Tenenhaus recently told the press that savings are “just part of the bigger picture.”
Some of the credit weaknesses that Cannon failed to address from the Moody's report include:
-Employment dislocations and an unemployment rate that exceeds national averages.
-Unusually high reliance on economically sensitive sales tax, approximately 80 percent of fiscal year 2009 general fund revenues to date, that creates increased potential for financial volatility.
Last week, Moody’s Investors Service placed Florida on its watchlist for a possible credit rating downgrade. In explaining the decision, it referred to: “the negative credit impact from a precipitous drop in revenues brought on by a protracted and deep dislocation in Florida's real estate market as well as the current recession.”
The company also stated that the watchlist action “reflects the continued decline in employment and personal income, relatively flat population growth and net migration.”
If Florida’s bond rating is downgraded, the state government will have to pay much more in interest whenever it borrows money. Taxpayers will have to cover those increased costs while receiving fewer state services due to budget cuts.
Moody’s said that Florida could improve its standing through:
-Restoration of a high level of reserves.
-Adherence to structural budget balance while also absorbing spending pressures.
-Adoption of a budget with less dependence on nonrecurring solutions coupled with a plan to restore reserves over the mid-term.
Rep. Dean Cannon (R-Winter Park), chief budget negotiator for Florida’s House of Representatives, claimed the watchlist news gave further evidence showing why the Senate should agree to more spending cuts that will go into the state’s reserves.
However, Moody’s Vice President Mark Tenenhaus recently told the press that savings are “just part of the bigger picture.”
Some of the credit weaknesses that Cannon failed to address from the Moody's report include:
-Employment dislocations and an unemployment rate that exceeds national averages.
-Unusually high reliance on economically sensitive sales tax, approximately 80 percent of fiscal year 2009 general fund revenues to date, that creates increased potential for financial volatility.
They/re just gonna use this to push ol' Jeb Bush's state tax proposal.
ReplyDeleteThe GOP is complaining about this threat to the bond rating while ignoring what it says about the state's unemployment problem.
ReplyDeleteThe legislature just turned down $444M in unemployment stimulus funds because it didn't want to find more money for the state's unemployment trust fund.
You know, that's insane.
ReplyDelete