By Michael Peltier
TALLAHASSEE (Reuters) - Belt tightening, gubernatorial vetoes and reduced tax collections prompted a $500 million dip in Florida's $27.7 billion of direct bond debt, the state's bond chief said on Tuesday.
Florida took out $900 million in additional debt in the fiscal year ended June 30, but paid off $1.4 billion, Ben Watkins, director of the Florida Division of Bond Finance, told the governor and cabinet in an annual review of the state's bond indebtedness.
"We've looked at it 20 years back, and it's the first time it's gone down," Watkins said.
Florida remains above a self-imposed 7-percent debt ratio cap, but expects to see that ratio -- defined as a percentage of revenues available to pay bond costs -- to fall over the next several years as the state benefits from lower interest rates, pays off some debt and adjusts to a reduction in capacity to issue new bonds.
Florida, whose economy still suffers from high unemployment, weak housing markets and soft tax collections, is expected to remain above 7 percent through 2013.
But the ratio should drop to 6 percent after 2014 as the fourth most populous U.S. state makes a final payment on environmental bonds, according to Watkins.
The ratio will continue to fall, if current spending trends endure, to 4.9 percent by 2021 as state lawmakers are expected to limit new debt issuance to $5 billion over the period, which Watkins said was an historic low.
Going forward, Watkins said, the state will benefit from historically low interest rates. During the last calendar year, Florida has refinanced more than $2.2 billion in outstanding debt and should save approximately $270 million in interest over the course of the bonds.
Florida's total reserve funds are expected to fall from $3.4 billion to $3 billion by the end of the current fiscal year ending next June.
In addition to the $27.7 billion of Florida bonds, the state is also indirectly responsible for another $16 billion in debt issued by Florida's property insurance agency and a fund for catastrophic insurance losses from hurricanes. Adding direct and indirect debt, the state has total debt of $43.7 billion.
Speaking to reporters following the briefing Tuesday, Florida Gov. Rick Scott said he will continue to lobby to limit future bond issuance to core public works projects.
"I don't want to burden future generations with debt that we should be controlling in our state," Scott said.
Environmental groups have lamented the loss of significant funding in recent years for conservation land purchases. They may have to continue waiting for a return to years when the state bonded $300 million a year for land buys and leases.
"I'm going to try to make sure, if we have any new debt in the state while I'm governor, it is on infrastructure that we are very comfortable helps grow our state," Scott said.