An economic crossroads; With growth and revenues at historic lows, experts say we should shift to a technology economy. But that would mean funding it

DATELINE: TALLAHASSEE

Modern Florida has been built on the mantra of growth.

In most years, the state could count on adding about 1,000 new residents a day -- or the equivalent of accommodating a new city of Miami each year.

The benefits of growth were many, not the least of which was that it swelled the state bank account with sales taxes, real estate fees and other revenue.

But the growth machine has come to a grinding halt this year with the collapse of the housing market and the nation teetering near recession. State economists recently estimated that Florida would see a net migration of only 89,000 new residents this year -- the lowest total since at least 1950. Florida will have its smallest overall population growth since 1975.

The flattened growth has left sales tax collections -- which gained nearly $2 billion a year during the real estate frenzy -- stagnant. It has toppled other real estate tax collections, such as the documentary stamp tax, which took in a high of $1.6 billion in 2004-05 and is expected to bring less than $450 million in the new budget year.

The revenue drop has left state lawmakers, who begin their annual 60-day session on Tuesday, facing a second year of difficult budget cuts. They will spend the first few weeks of the session cutting another $543 million from this year's $70 billion budget, including $357 million from education and $49 million from courts and other justice programs.

But the more onerous task begins July 1, when they have to put together the state budget knowing they may face a shortfall in the range of $2 billion or more.

"By everybody's estimation this is going to be the worst budget year that anybody has seen in decades," said Sen. Nan Rich, D-Weston, a member of the Senate budget committee that oversees health care spending. "There is probably almost nothing that will not be cut in some way or another."

Others believe that while this year's budget will be extremely difficult, the state will rebound quickly, much as it did after the economic slowdown following the 2001 terrorist attacks.

Senate President Ken Pruitt, R-Port St. Lucie, said state programs would face "a shared adversity" this year.

"If everybody gives a little, we can do a lot," Pruitt said. "We're going to get through this. At the end of the day, we're going to be better for it."

But while the Senate has signaled a willingness to look at increased bonding and the use of state reserves and trust funds to ease the budget crunch, House Speaker Marco Rubio, R-West Miami, said the worst thing the state can do would be to try temporary fixes that shift the financial burden to future years.

"We need to send the signal that when times are tough Florida will make the tough decisions," Rubio said. "We won't pass the buck on to the taxpayers."

Gov. Charlie Crist has taken a positive view of Florida's future, arguing that the recently passed Amendment 1 will cut property taxes and help the state's economy.

"I am confident that as a result of having done that, we're going to stimulate Florida's real estate economy, and that's why maybe I have more optimism than some," he said.

While many state leaders believe the nation's fourth-largest state will rebound, as it has done after other economic downturns, some leaders and economists believe Florida is at a crossroads in terms of its economic future.

They argue that Florida must begin to shift its reliance on historic mainstays such as growth, tourism and agriculture to an economy with a stronger base in technology and information services. A key to that shift, they say, is an increased emphasis on education, from pre-kindergarten through university doctoral programs.

"We have spent the last decade fueling our state economy on the vapors of growth and construction, while ignoring investment in the kind of education and work force development that attracts high-wage industries," Dan Gelber, the Democratic leader of the House, wrote in a letter last week.

A new economic report -- written by an adviser to former Gov. Jeb Bush for the Miami-Dade teachers' union -- warns that Florida has fallen behind other states in education funding and trails in other key indicators, such as producing students with bachelor's degrees and doctorates in science and engineering.

"That's where the crossroads sits," said J. Antonio "Tony" Villamil of The Washington Economics Group. "How do we develop a more productive, more knowledge-based economy so that we attract the kind of jobs that do not depend simply on labor supply but that depend on talent? That's why the link with education is so important."

House and Senate leaders acknowledge the need to adjust Florida's economic strategy, although in a year with little new money critics say it will be difficult to do more than talk about the need to increase the state's commitment to education and other "knowledge-based" initiatives.

Indeed, the very programs many leaders say are critical to the state's sustainable economic future are the ones on the chopping block. Florida's university system, for example, is warning it may cut enrollment by 17,000, even though more students than ever are seeking admission.

Florida only ranks 43nd nationally in public investment in primary schools. And that position is unlikely to improve in a year when the Legislature may cut hundreds of millions of dollars in school funding.

Pruitt, the Senate's leader, said the state has begun to shift its economic focus, pointing to the half-dozen biomedical research groups that Florida has attracted in the last few years, including the Scripps Research Institute and the Torrey Pines Institute for Molecular Studies in Pruitt's hometown of Port St. Lucie.

"You don't get those type of institutions coming to Florida if they think that we're a bunch of hayseeds," he said.

In the House, Rubio said he wants the state to build on its successes of attracting biomedical groups by shifting the focus to clean energy initiatives.

"We should become the Silicon Valley of green technology," he said.

But, as with education, bold plans for renewable energy and other alternative fuel sources will not be an easy sell this year. The construction industry, in particular, opposes the higher costs such mandates could place on new homes in a real estate market that is already reeling.

Rubio has also been an outspoken advocate for strengthening the state's K-12 curriculum so that it can become globally competitive.

But Gelber, the House Democratic leader, said the emphasis on creating a new economy would not mean much unless the state is willing to back it with more funding -- a difficult feat in this extremely tight budget year.

And the Republican-led Legislature has shown little inclination to embrace any major effort to broaden the state's tax base.

"We need a lot more than talk," Gelber said. "Having a world-class curriculum means very little if your teachers are underpaid, your classrooms are overcrowded and you don't even allow people to go to higher ed because you don't fund enrollment growth."