A Labor Day Update from John Grant.

After a relatively quiet summer, the legislative pace will pick up after Labor Day. When legislators went home after the regular session last spring, they knew that there was a likely deficit in the budget they passed, and anticipated a special session this fall to make more cuts. However, revenues over the summer have been higher than anticipated and a special session will not likely be required after all, as while there is still a deficit, there are enough reserves to cover it. However, the long range picture is not so healthy. It was federal stimulus money that covered much of the gap and that will help next year as well, but beyond that there are financial challenges looming on the horizon, so we need to watch for program cuts, higher taxes, higher fees, or more likely, a combination of all three of those.

However, in the past week or so, a momentum has been growing for a special session to ratify the Seminole Gaming package that the Governor signed last week. He signed on his own months back when the legislature failed to approve what he wanted and the Supreme Court said that he acted beyond his authority in doing so. Accordingly, the new pact will require legislative approval, which is not assured.

A special session on gaming is likely this fall and if it occurs, others are already clamoring to get on the agenda, the most high profile of which is legislation to approve offshore oil drilling. It passed the House last spring, but was not taken up in the Senate. You can also bet that if there is a session, other items will be added to the agenda.

Meanwhile back to the financial picture. Here is the summary published today by News Service Florida which shows both the short and long term trends:

Florida lawmakers will need an additional $2.8 billion in general revenue next budget year just to pay for critical programs as the state continues to pull its way out of recession, a legislative economist said Thursday.

Speaking to members of the Joint Legislative Budget Commission, economist Amy Baker said sluggish population growth and a lingering national recession will hold the state back until at least next spring. Significant growth won't return until January 2011.

Meanwhile unemployment is expected to inch up from the current 10.7 percent to top out around 11 percent before starting fall back to more historically moderate levels, said Baker, coordinator of the Legislature's Office of Economic and Demographic Research.

If lawmakers want to increase spending - even a little bit - on certain high priority programs, the need could jump by more than $4 billion.

"That's assuming you don't initiate any new programs and that the revenue forecast holds up," Baker said.

The budget commission is required to approve a long-range fiscal outlook by Sept. 15. The three-year picture is intended to give lawmakers a better idea of how budget decisions made in the current and upcoming fiscal year affect the state's financial position in the years to come.

Baker said a number of factors that have traditionally driven Florida's economy remain stagnated at best. Further, because the state is so dependent on growth, the economic picture won't improve until people in other parts of the nation feel financially secure enough to sell their homes and retire or seek new jobs in the state.

Still, she said, "We still are very optimistic that the recovery is around the corner," Baker said.

Florida watched as its white hot economy froze up as the housing market collapsed last year. The state went from the second fastest growing economy in 2005 to 48th last year. Florida lost 400,000 jobs over the 12 months.

Economists are expecting the state's population to fall by 58,000 residents during the current year, the first such decline in population in decades.

"The population picture right now is as much what's happening in the nation as what's happening in Florida," Baker said.

While state revenues lag, the costs of running the state will continue to mount. Meanwhile, federal stimulus dollars that have helped Florida weather the current downturn will not be available indefinitely and the state will be required to pick up the slack.

Medicaid costs alone are expected to rise by $1.8 billion next year and another $1.1 billion in 2011. There are also significant increases in the forecast, including class size reduction ($516 million) and court system funding ($62 million.)

Boosting the state's per student funding next year would increase costs.

Continuing optional Medicaid programs, including the Medically Needy program for people whose income may be too high for Medicaid but are still hit by high medical costs, will add another $250 million to the state's tab.

Rep. David Rivera, R-Miami, and chairman of the LBC, said lawmakers won't have a clear picture on what they'll need to cut until later on this year.

"You can expect the Legislature to again live within its means," said Rivera, who will head up the House budget negotiation team in the coming year.

I wish you all a very enjoyable Labor Day.