The Legislature has chopped about $7 billion from the state's annual budget over the last three years -- enough to run Florida's courts and all state environmental, agricultural, prison, and public safety agencies combined for a full year.
Lawmakers expect to wield their axes again in 2010, probably in some new and painful ways when they convene in regular session March 2.
"With each passing year of seeing the depth of the economic trough that we're finding ourselves in, you start to make decisions that you thought you could have deferred, but the reality is that you can't any longer," said Senate President Jeff Atwater, R-North Palm Beach.
That means state employees, who have gone without pay raises for four years but also have avoided pay reductions, may bear the brunt of this year's cost-cutting. It could include layoffs, furloughs and cuts in wages and benefits such as sick and vacation days. State employees also may be asked to pay higher health insurance co-payments and deductibles.
"I can't take those off the table and protect those, I just can't," Atwater said. "So I think they are going to be a part of the final plan."
House Speaker Larry Cretul, R-Ocala, agreed everything must be considered but said he's sensitive to criticism that laying off state workers may only add to an unemployment rate nearing 12 percent.
"We're not necessarily interested in what we call the draconian -- come in with the sword and all the pink slips," Cretul said. "I don't want to send out the alarm to all of our folks that they've got to start looking, but I've also got to let them know that we will be looking."
Last year, the Legislature softened the blow by raising taxes and fees by $2.2 billion and plugging in about $5 billion in federal stimulus money but still had to cut spending in the current budget that runs through June 30.
Heading into an election year, leaders of the Republican-controlled Legislature say they won't be considering any more tax and fees increases.
General revenue flowing into the state treasury, though, is expected to show its first significant growth in four years -- about $1.4 billion -- as Florida slowly begins to recover from the Great Recession. It's still won't be enough to offset rising costs.
Lawmakers are facing a potential gap of up to $3.2 billion between the money coming in and what it's going to take to maintain vital services led by exploding Medicaid rolls but also including schools and public safety.
Budget-writers are digging deeper to find smaller cost savings that may add up. That may include taking part-time state workers off Social Security to avoid $4 million to $11 million in employer matching payments and reducing lease expenses by combining two or more agencies at a single site.
Cretul has limited the number and size of claims bills that compensate citizens for injuries caused by government agencies or employees such as traffic accidents. He's also asked appropriations committees to go through the budget line-by-line looking for possible savings.
"We need a lot of nips and snips to get to that $3.2 billion," Cretul acknowledged. "Consequently, we have our work cut out for us."
Gov. Charlie Crist has proposed a $69.2 billion budget that would increase spending by $2.7 billion, or 4 percent. Lawmakers, though, are skeptical.
"It really is making a lot of assumptions and kind of relies on a wish and prayer," said Rep. Kelly Skidmore, D-Boca Raton.
Crist's proposal assumes the state will get about $1 billion in additional federal money for Medicaid that Congress has yet to approve and $433 million from an agreement with the Seminole Indians for an expansion of gambling at tribal casinos, which a House committee already has rejected.
Another assumption is all school districts will adopt a new optional property tax of $25 per $100,000 of taxable value authorized last year, but 24 districts have not yet done so.
Crist's budget director, Jerry McDaniel, said the governor is prepared to revise his recommendation if those assumptions prove unreliable.
"We have worked up two or three different versions of areas we would cut ..., but the governor asked that I make these assumptions," McDaniel told the Senate Ways and Means Committee. He would not, though, say what the cuts might be.
Crist's budget also has only $250 million in reserve. Cretul said he's not sure what the final number may be but that he's thinking about $1 billion.
That would give the state a bigger cushion for the unexpected and possibly avoid a downgrading of state bonds, which would make borrowing more expensive.
If not spent, the reserve would give next year's Legislature a head start on finding money to replace stimulus dollars when that federal program expires. The 2010-11 budget is expected to include at least $2.5 billion in stimulus spending, including nearly $1.4 billion for education. That money will be gone the following budget year.
The biggest part of any budget is education, and Crist has proposed a spending increase of $179 per student in kindergarten through 12th grade. That's 2.6 percent more than this year and would raise the total to $7,045 per student.
Wayne Blanton, executive director of the Florida School Boards Association, likes the governor's recommendation but said it may not be realistic. He's hoping to at least avoid any further reductions.
"We just cannot handle any more cuts," Blanton said, noting that spending has dropped $425 per student over the last three years. "If the budget continues in the same direction, this is the year when a lot of electives are going to be gone. You're starting to talk about band and after school programs and clubs."
Even while contemplating pay cuts and layoffs, lawmakers are considering tax breaks and grants designed to stimulate business and create private sector jobs to help bring the state's economy out of recession. A wide-ranging Senate jobs bill with an emphasis on the space, entertainment, aircraft and boat industries could cost hundreds of millions of dollars.
Atwater said the focus is not just on immediate jobs but to diversify Florida's traditional three-legged economy that has relied on agriculture, tourism and construction.
"We must continue to seed economic development opportunities for jobs we can create into the future," Atwater said, adding, "Even if it means that I reduce existing programs in the state that may impact my fellow Floridians who are here working beside me."