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Lawmakers debate best way to steer state budget

At the center of debate is Florida's tax system, which some say could lead the state into deep trouble if lawmakers don't look down the road as they plan now.

Published April 3, 2003

TALLAHASSEE - Florida is a $52-billion-a-year enterprise with a lot going for it. The core products, sunshine and low taxes, have been popular for decades. The customer base is at an all-time high and still growing.

The future looks bright on the surface, but a close look reveals cracks in the facade. Florida faces challenges that would worry any business executive: Revenue growth is down, costs are up and demands for better service are increasing.

The state House and Senate today will begin debating contrasting plans for the state that illustrate a deep philosophical divide about Florida's future.

On one side are Gov. Jeb Bush and most House members who believe the state should simply tighten its belt until the economy revives. Raising taxes, they say, would only make things worse.

On the other are Senate Republicans and Democrats who see a state backsliding, with more cutbacks and layoffs ahead unless new money is found from closing tax loopholes, increasing taxes, or legalizing slot machines at horse and dog tracks.

The debate centers on Florida's tax system. Three-fourths of the state government's operating money comes from sales taxes, which fluctuate with the economy. Florida is one of only seven states without an income tax, and there's little support for raising more money by extending the sales tax to services such as haircuts or advertising.

Every spring, the Legislature patches together a budget to get through another year.

"There is no long-term plan because nobody in Tallahassee cares about that. Their priority is to get re-elected," said David Scott, a professor of business at the University of Central Florida. "And the priority of the homeowner is to survive another year and enjoy it while you're doing it."

Florida is faring better than other big states, but it still faces a $3-billion budget shortfall. It is worsened by $800-million because of the anticipated loss of Florida's share of the federal estate tax and the phaseout of an intangibles tax on stocks and bonds.

The Clinton-era economic boom allowed Bush to cut taxes by $6-billion over four years. But voters also are demanding smaller class sizes, universal preschool for 4-year-olds, a bullet train and full state support of the court system.

Those demands will cost billions of dollars.

Yet Florida voters also re-elected Bush and surrounded him with Republican lawmakers who strongly oppose new taxes and costly spending programs.

What Bush and his allies consider a businesslike approach to managing public money is viewed as shortsighted by moderates.

"We would never, ever run our businesses this way," said Sen. Tom Lee, R-Brandon, a home builder. "We're just continuing to dig a deeper hole for our leaders and deeper debt for future generations. The system is broken and at some time someone's got to stand up and say the emperor is naked."

House leaders counter that Florida's current problems will not last.

"I'm an optimist," said Rep. Bruce Kyle of Fort Myers, the House budget chairman. "We've got one of the best economies in the nation. We'll get through this, Florida's economy will boom once again, and we won't have problems. The growth in our economy will offset the growth in our budget."

Still, the wolf is at Florida's door, demanding payment for yesterday's budget decisions. Bigger debts lie ahead. To make ends meet, lawmakers are increasingly turning to untested or controversial fiscal balancing acts.

The House, for example, would siphon $1.5-billion from trust funds created for specific uses such as affordable housing. About half of that money won't be there next year but the expenses will.

"It's spending money that you don't have," said Dominic Calabro, president of Florida TaxWatch. "You begin to commit the state to programs constituents want, demand and expect, when you no longer have the revenue to honor those ongoing commitments."

Legislators talk of running the state like a business. But where some see IBM, others see Enron. One expert says one of Florida's most unsound business practices has been to ignore small deficits.

Two examples are the hole in the state health insurance fund, forecast to hit $160-million next year, and a $150-million gap in the state's commitment to match private grants to state universities.

"There are a whole series of things that are off-budget and ignored. It's basically what Enron did," says Ed Montanaro, who retired last year as the Legislature's chief economist. "It pulled unmet obligations off the books. That's been the story of our state budgetary process for the last four years."

Every year, 300,000 people move to Florida, the equivalent of another Tampa, stretching needed services. Yet state government lives paycheck to paycheck, and sometimes takes out giant loans like some of its cash-starved residents.

This year, for the first time in memory, no new money is on the table to pay for the cost of government. It's gone, swallowed by the Legislature last year to balance this year's budget.

"It's like taking your overdue Visa bill, and paying it with your MasterCard, knowing that the MasterCard is almost over its limit as well," Senate President Jim King, R-Jacksonville, told a roomful of bankers. "Sooner or later that house of cards is shaken and broken."

The Senate hopes to build public support for more revenue with a gloom-and-doom budget that slashes spending on social services and education. But some observers say the timing is bad.

"The war is going to detract people's attention from the overall budget crisis," says Tony Carvalho, a former legislative budget expert who now lobbies for hospitals. "That's going to make it more difficult for a variety of options to be discussed."

Thriving businesses invest in their core product. For Florida, that's education. But universities and community colleges say they could be worse off next year.

Valencia Community College in Orlando, for example, has about 32,000 more students this year than the state budgeted. The college president said the preliminary budgets in the House and Senate, while better than Bush's, would leave 50,000 unbudgeted students next year.

"We're still left with a vast number of unfunded students, but it's still very early in the session," says Valencia's president, Sandy Shugart. "Without some additional revenue from somewhere, many important programs in the state are going to take draconian cuts."

Worse times may be ahead. Even Bush warns of possible tax increases next year.

He mostly blames the class size amendment. Others blame Bush for cutting taxes and failing to plan for rising costs.

"We spent the last four years repealing taxes," Montanaro says. "We did it without making adequate adjustments on the expenditure side of the budget and it just simply got worse."

To Bush and the House, it's all a matter of perspective.

They proudly contrast Florida's plight with that of California, which has a $35-billion deficit, the result, they say, of high taxes and unrestrained spending. However, the California crisis stems partly from the same one-time funding shifts Florida lawmakers employed last year and are considering again this year.

Chuck Dunnick, a Republican Osceola County commissioner and president of the Florida Association of Counties, said weak political leadership prevents Florida from expanding its tax base.

"When you continuously raid your trust funds and you get all those balances down to zero, and you've still got next year to deal with, we're going to be just where California is. It's just going to take us five or 10 years," Dunnick says. "Florida is in a fiscal crisis."

- Times staff writer Alisa Ulferts and researcher Deirdre Morrow contributed to this report.

[Last modified April 3, 2003, 03:46:38]

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