House GOP cites threat to bond rating
TALLAHASSEE (AP) – House Republican leaders argued Thursday that the state must make deeper spending cuts to rebuild Florida’s reserve funds and avoid a downgrade of the state’s bond rating.
House Majority Leader Adam Hasner sent an e-mail to representatives noting Moody’s Investors Service had put Florida’s top level Aa1 bond rating on a watchlist for a possible downgrade two days earlier.
That’s because Florida lacks a plan to restore reserves spent down to avoid a deficit and is using one-time income to pay a significant portion of recurring expenses, including about $3 billion in federal stimulus money.
The rating could be downgraded after 90 days. If that happens, the state could be forced to pay higher interest rates to borrow money, potentially costing taxpayers millions of dollars.
“The House is thinking beyond the short term and is working to rebuild our savings so that we have enough resources for the future and are prepared for when the stimulus dollars run out,” wrote Hasner, R-Delray Beach. “We need to make tough decisions today so that we can create a stable financial environment for Florida’s economy to rebound.”
Hasner’s warning came amid a continuing budget impasse between the House and Senate.
“We are still having the dialogue back and forth and still trying to work on, frankly, some common themes,” said Senate President Jeff Atwater, R-North Palm Beach. “The House has asked us to take a harder look at reducing levels of spending and so that’s what we’ll continue to look at.”
House Speaker Larry Cretul, R-Ocala, said he expected to have a clear idea Friday of the direction the Legislature is going in on the budget with only one full week left in the regular session.
Florida has about $1.8 billion remaining in various reserve accounts after lawmakers tapped $1.6 billion through deficit-reduction legislation passed in January.
The current total includes only $270 million in working capital, the main reserve fund. Both chambers favor increasing it, but the House wants to put more aside than the Senate, which would rather spare education, health care and other programs from additional spending cuts.
The state already has chopped spending by more than $7 billion over the last two years due to Florida’s declining economic condition and resulting revenue shortfalls.
“I don’t believe we need multibillion dollars in the bank,” said Senate Ways and Means Chairman JD Alexander, R-Lake Wales. “I think we can do it with $1.5 billion to $2 billion” in the working capital fund.
Alexander acknowledged more might be needed if the economy takes another severe dip but said that’s not what economists are forecasting.
“At this point what we’re being told by thoughtful knowledgeable professionals is that we hope to expect a steadier economy through this year with some increase in the next two years – not a lot, but some,” Alexander said.