Florida "A State of Change": For Decades, Florida's Prosperity Was Based on a Simple Premise: Growth. Growth in the Population Led to a Booming Housing Market, Job Market, Revenue Base, and the Advantages They Afforded. in the Wake of a Punishing Housing Slump and Slowing Population Growth, How Does Florida Begin the Next Chapter of Its Sun-Kissed Existence?
Somoza, Lela, EconSouth
Florida, a state perhaps known as much for its booms and busts as its sandy beaches, has enjoyed at least one relative constant since the 1940s--strong population growth. Lured by the state's mild climate, miles of coastline, relatively low cost of living, and lack of a personal income tax, retirees and job seekers alike formed a seemingly endless stream of new residents. "For decades, it was a one-way road of in-migration," said Sean Snaith, director of the University of Central Florida's (UCF) Institute for Economic Competitiveness. "People came to the state and generally stayed." In the decades following World War II, Florida's population growth consistently outpaced the rest of the South (see chart 1), helping to make it the fourth most populous U.S. state by the end of the 20th century.
The state's healthy population growth also powered much of its economic growth. Indeed, the two are closely intertwined, thanks largely to the population-driven construction and real estate sectors. "Population growth packs a one-two punch for the economy," Snaith said. To start, all those new residents needed a place to live. The demand for homes fueled the state's construction industry, a key element of Florida's so-called "economic triad," which also includes agriculture and tourism. As a result, the state's economy came to rely more heavily on construction-driven growth than did many other states. To illustrate, the most recent data available from the U.S. Department of Commerce show that in 2009, construction accounted for just over 5 percent of Florida's economy, compared to 3.8 percent for the nation.
Florida's tax structure is also predicated on strong growth, with state and local governments depending heavily on new residents to fill their coffers as new Floridians fund roads and schools with the property and sales taxes they pay. These tax revenues are especially important in Florida, which is one of seven states without personal income taxes. Indeed, the state's sales tax makes up three-quarters of general revenue in the state budget, according to the Florida Center for Fiscal and Economic Policy. Other population-linked taxes, such as real estate transactions, are also key funding sources for state and local governments.
Fewer new Floridians
Following decades of impressive gains, Florida's population growth has slowed dramatically in recent years. After increasing 33 percent in the 1980s and 24 percent in the 1990s, Florida's population grew only 18 percent in the past decade, according to the U.S. Census Bureau. While many other states might envy that figure, the seemingly smooth pace of growth masks more significant swings experienced on a year-to-year basis (see chart 2). Indeed, around the peak of the housing bubble from 2004 to 2006, the state gained well over 300,000 new residents a year, according to estimates from the University of Florida's Bureau of Economic and Business Research (BEBR). However, in 2007 and 2008, following the housing crash and the ensuing recession, the state's population growth grew by fewer than 200,000 in each year. The BEBR initially estimated that Florida's population fell by more than 58,000 from 2008 to 2009 in what would have been the first year of decline in more than 60 years. Recent revisions to those estimates, however, suggest that the state actually gained about 73,000 residents during that period, which is still the smallest increase since the 1940s and pales in comparison to the average yearly population growth of about 280,000 seen during the previous decade.
Given Florida's reliance on new residents for economic growth and tax revenues, it is no surprise that the drastic slowdown in its population growth has prompted Florida's leaders, economic developers, and businesses to rethink its economic development strategy.
Most of the blame for the state's sluggish population growth lies squarely with the housing crisis and recent recession. …