The House Appropriations Committee pondered Gov. Rick Scott’s proposed budget Thursday afternoon and began the long, difficult process of crafting a budget despite a large shortfall.

“We all know about the serious challenges we face,” said Denise Grimsley, R-Sebring, the chairwoman of the committee, specifically noting the $4.6 billion shortfall the legislators face when they convene in March.

JoAnne Leznoff, the staff director for the committee, offered legislators a stark reminder of the coming shortfalls as she guided the committee members through the numbers, offering a recap of the state’s fiscal situation. Leznoff offered a presentation showing shortfalls of $4.62 billion in FY 2011-12, $4.56 billion in FY 2012-13 and $3.56 billion for FY 2013-14, and broke down the spending from general revenue and state trust funds

“This shortfall is significant, it’s very significant,” said Grimsley who called the Legislature’s task of crafting a constitutionally mandated state budget “challenging.”

Jerry McDaniel, the director of Scott’s Office of Policy and Budget, and his team presented and defended the governor’s proposed budget, arguing that it will help revive Florida’s sluggish economy and continuing high unemployment.

“He is on a mission to create jobs with this budget,” insisted McDaniel, pointing to Scott’s inaugural address and his speech on Monday when he unveiled the budget.

McDaniel offered a gloomy take on Florida’s economy. He focused on unemployment, noting that the state has the third highest rate in the nation and will remain above 10 percent until at least 2013. McDaniel also noted that the Sunshine State’s net migration was not at levels it had been a decade ago, though he expressed optimism that those numbers would improve as the national economy recovered.

Scott’s budget proposal calls for reducing the $70.5 billion budget passed for FY 2010-11 to $65.9 for FY 2011-12 and to $63.3 billion in FY 2012-13, the smallest the budget has been since FY 2004-05 when it stood at $59 billion.

“It’s an almost 10 percent reduction of where we are now,” said McDaniel, referring to the FY 2012-13 proposed budget.

Noting that the number of state employees peaked in FY 2009-10 with 128,131 before dropping to 126,765 in FY 2010-11, McDaniel said the Scott budget proposals would reduce that number by more than 10 percent. The Scott budget would lower the number of state workers to 118,087 in FY 2011-12 and then to 113,981 in FY 2012-13.

McDaniel repeated pledges Scott made during the campaign to use accountability budgeting, reduce spending, reform regulations, promote jobs, reduce property taxes and end the corporate income tax while keeping the state education system competitive in the global and national marketplace by increasing school choice opportunities.

McDaniel conceded that the state would lower funding per student by 10 percent, more than $703 per student. However, McDaniel countered, school districts would save considerably if pension plans are reformed by having employees pay into their own retirement systems. With these savings, McDaniel argued the state was spending just less than $299 per student from last year, a reduction of 4.33 percent.

Weighing in on Scott’s proposal to eliminate the corporate income tax, McDaniel said the plan was to reduce the rate from 5.5 percent to 3 percent in FY 2011-12, lowering it by 0.5 percent each year until it was phased out altogether. 

Noting that the governor wanted to cap Medicaid spending at FY 2011-12 levels, McDaniel said that the governor did have a Medicaid reform proposal of his own but would work with the Senate and House on the matter. “Left unchecked, this will consume more than half the state budget,” said McDaniel.

McDaniel also noted Scott’s proposal to have state workers contribute up to 5 percent of their salaries into their pension plans, bringing their retirement plans more into those of employees in the private sector.

The Scott plan calls for $4.1 billion in tax relief over the next two years by reducing the corporate taxes, local efforts, unemployment compensation taxes, extending the water management district tax holidays and motor vehicle and highway fees. According to McDaniel, this will save each household in the Sunshine State $540 in the next two years.