Florida's debt shrinks at rate not seen since 1982
Governor Rick Scott's veto pen helped reduce Florida's debt in back-to-back years for the first time in at least three decades. Lawmakers say it might be time to reverse course.
The cuts are driving bonds of the fourth-biggest state to the best performance in almost a decade. Debt of Florida and its localities has earned 9.2 percent this year, beating the 8.9 percent return for the $3.7 trillion municipal market, Standard & Poor's data show. Florida also beat the market in 2011, leaving it on a pace to outperform in consecutive years for the first time since 2003.
Of the five most populous states, Florida alone saw its debt fall in the period, said John Sugden, director of U.S. public finance at S&P. The drop to $26.2 billion as of June 30 from $28.2 billion in 2010 followed Scott's move to limit new issuance last fiscal year to the lowest since 1990, as well as reduced demand for infrastructure spending and refinancings that saved $1.1 billion.
"It's a pretty rare achievement for an administration to bring down the actual level of debt," said John Hallacy, head of municipal research at Bank of America Merrill Lynch in New York. "What's interesting is you'd see this in bad times when you'd think issuing debt would raise proceeds to employ people."
While the state's unemployment rate, at 8.5 percent, is down from 11.4 percent in the first quarter of 2010, it is still above the national average. Florida's economy might have benefited had it financed more building of roads and schools, Hallacy said.
Scott, 60, a former chief executive officer at HCA Holdings Inc. elected in the Tea Party wave of 2010, vetoed more than $474 million in new bond authorizations from the 2011-12 budget. The state's $410 million in new issuance that year was the lowest in two decades, said Ben Watkins, the state's bond finance director. The state hasn't cut debt for two straight years since at least 1982, Watkins said.
The Republican governor's approval rating has been above 39 percent just twice in 16 polls by Hamden, Connecticut-based Quinnipiac University since he took office.
"The governor continues to be concerned about the long-term debt obligations held by the state's taxpayers," Melissa Sellers, his communications director, said by e-mail. Scott "will consider any proposal for new debt through additional bonding based on the financial risk posed to Florida taxpayers and the return on investment of their tax dollars."
Florida isn't alone in curtailing borrowing. California Governor Jerry Brown, a Democrat, curbed debt sales when he took office last year, trimming new general-obligation bonds in the past two years to $7.5 billion, from $30.8 billion the prior two.
In Florida, after two years of austerity and signs of economic recovery, lawmakers should consider financing more building with new debt, said state Senator Anitere Flores, a Miami Republican who has been on the budget committee for two years.