By Ian Swanson - 06/17/10 10:00 AM EDT
BP stockholders will be licking their wounds on Thursday, but so will residents of the Sunshine State.
While the devastating oil spill will cost BP shareholders their dividends, it is projected to cost the Gulf region’s five states more than 16,000 jobs and $1.15 billion from the area’s gross domestic product.
Florida’s economy wasn’t in the greatest shape before the spill. But it could be in worse shape than BP after the spill.
In announcing it would suspend its dividend for the year, BP’s board said it believed “it is right and prudent to take a conservative financial position” given the uncertainty of its costs and liabilities from the spill.
Still, the board said BP’s businesses continue to perform well, with cash flows from operations exceeding $30 billion in 2010.
Compare that to Florida, which has an unemployment rate of 12 percent. It’s also suffering through one of the worst housing crises in the nation, and its state government is dealing with a budget shortfall of $3 billion.
The state’s $60 billion tourism industry is expected to take a major hit. That’s one reason President Barack ObamaBarack ObamaWatch Obama's full correspondents' dinner speech Five ways Trump will attack Clinton Armstrong Williams: Obama 'should get on his knees and pray' MORE had himself filmed with Florida Gov. Charlie Crist on the beaches of Pensacola on Tuesday.
Florida’s state government does not have estimates of the economic damage from the spill, according to Sterling Ivy, a spokeswoman for Crist. An economic impact study is ongoing, and Crist has convened a task force to work for the next 30 days.
Visit Florida, the state’s tourism office, also has no statistics on the damage.
“We are hoping to get money from BP to do research on the economic impact,” said Kathy Torian, the office’s communications manager.
BP has given Florida $50 million and pledged another $25 million. Crist had asked for $150 million, according to the Orlando Sentinel.
Tourism generates about 21 percent of Florida’s state tax revenue, which is particularly important in a state with no income tax. About 1 million people in Florida are employed by businesses catering to tourists.
Moody’s estimates Florida will lose more than 9,000 jobs because of the spill, and that its GDP will be hit by a half-billion in the fourth quarter of this year, assuming three key assumptions are met.
All of them could fall through, which would make the economic devastation far worse.
The company assumes the spill — now estimated to be shooting up to 60,000 barrels of oil a day into the Gulf — will be plugged through the development of a relief well by mid-August.
It also assumes that businesses damaged by the spill will be “made whole,” either through damages paid by BP or government aid.
BP and the White House took a step toward making businesses whole on Wednesday by setting up a four-year, $20 billion escrow account to handle damages. It will be overseen by Kenneth Feinberg, who ran a compensation fund for 9/11 victims’ families.
The third assumption made by Moody’s is that the six-month ban on deepwater drilling imposed by the Obama administration will be lifted by December.
That sets up the drilling ban as a politically explosive issue for the Obama administration. Republicans in Washington and the Gulf are already using the fear of job losses to press the White House.
In a letter to Obama earlier this month, Louisiana Gov. Bobby Jindal (R) said local estimates show the drilling suspension alone could cost his state 10,000 jobs over a few months. If the ban is extended, the Louisiana Department of Economic Development estimates the state could lose more than 20,000 existing or new jobs in the next year and a half.
Washington Republicans are likely to use the drilling ban as ammunition during the monthly battles over unemployment numbers.
Even if all of Moody’s assumptions are met, the Gulf region will be negatively affected by the spill for years. The company projects job losses, a loss of gross domestic product and falling home values as far as the end of 2012, when Obama will be on the ballot.
The spill is not expected to have a huge impact on the national economy.
“There’s no significant macroeconomic impact,” said Mark Zandi, chief economist for Moody’s. “It’s not going to affect the national economy. But it is going to have a very long impact on the regional economy.”
The political impact of the spill could be just as heavy, particularly in Florida.
According to the latest House race projections by The Cook Political Report, Democrats are in danger of losing as many as four House seats in Florida. Democrats have shifted five seats from the GOP column over the last two elections.
Shira Poliak contributed reporting to this story.