A multibillion-dollar bounty sparks debate on tax cuts, rainy-day funds and growth management.
By STEVE BOUSQUET, Times Staff Writer
Published April 12, 2005
TALLAHASSEE - Florida's surging economy will produce an unprecedented $2.2-billion more in taxes next year, setting the stage for major debate on whether the state needs to start paying for its explosive growth.
Economic experts say the tax windfall is the result of people buying second homes for vacations or investments, and more people buying other taxable items such as cars. Retail sales after last year's hurricanes also played a role, they said.
"We continue to outperform the rest of the nation on almost every measure we have, and our real estate market is setting Florida apart from any other state," said Amy Baker, a member of the state's Revenue Estimating Conference team.
The multibillion-dollar bounty arrives in the treasury just as the House and Senate begin negotiations over the budget for the fiscal year beginning July 1, with some philosophical differences between them.
The House favors tax cuts of more than $300-million next year and for setting some of the windfall aside, partly as a hedge against an economic downtown and partly as a signal to the people back home that not every dime of tax money should be spent.
Senate President Tom Lee wants all the new money spent on his top priority: managing the state's growth. He used the revenue projection to make his case for an investment to reduce gridlock and overcrowded schools.
"(The) announcement of over $2-billion in new revenue could not have come at a better time," Lee said in a statement. "It is my hope that we can use this temporary boost as a healthy down payment on our state's critical infrastructure needs."
Lee has struggled for weeks to forge a consensus with the House, governor, counties and cities on paying for growth, an issue that has frustrated Florida leaders for two decades.
The Brandon Republican says the state alone has $35-billion in unmet growth-related needs over the next 10 years, including schools, roads and water improvements. That does not include the growth needs of cities and counties, Lee said.
House Speaker Allan Bense, R-Panama City, refused to commit to using all of the new money for growth.
"We'll take a look at it," Bense said. "I'm not quite ready to go quite that far yet. Somewhere in the middle, we'll meet."
Bense voiced support for tax cuts, including permanent elimination of the intangibles tax on stocks and bonds. But senators are unwilling to embrace tax cuts when they are making the case for unmet needs.
"I don't want to spend it all," Bense said. "We're having good times, but it's temporary. Let's not spend every nickel of it."
Despite the new money, lawmakers want to cut the rate of growth in Medicaid, raise tuition for community college and university students and postpone an increase in staffing ratios at nursing homes that they approved four years ago.
Gov. Jeb Bush's spokesman, Jacob DiPietre, said Bush would soon suggest how the Legislature should spend the new money. Bush earlier broadly endorsed Lee's call for a source of money for managing growth.
"I don't think we'll ever eliminate the deficits of two generations of growth in Florida in terms of infrastructure, but we could cut into it," Bush said last week. "And if we had a system that says we need to pay as we go forward, for the next 30 years, that would be a sizable contribution that I know the speaker and the president and myself are anxious to try to solve."
The $2.2-billion windfall is on top of an earlier $4-billion increase that has allowed legislators to craft a budget that raises public school spending by at least 5 percent, even as Medicaid consumes nearly a fourth of the entire budget, including a $1.3-billion increase next year.
Nearly half of the windfall is in the current fiscal year but the budget for this year is already set, so that $1-billion is carried forward for use in the fiscal year that begins July 1.
The largest single increase in projected tax revenue comes from the statewide 6 percent sales tax, applied to most consumer purchases. Close behind is a projected increase of $564.4-million in documentary stamp taxes, levied on real estate transactions.
Alan Johansen, a Senate adviser who has been helping estimate revenue for years, called Monday's figures "unprecedented."
The revenue forecasters are mostly career officials with expertise in fiscal matters who work for the Legislature or the governor. By nature they are cautious, but even they were astounded by the growth in documentary stamp tax collections, which have nearly doubled since 2002.
"How can you model a tax source that doubles in size in three years?" asked forecaster Christian Weiss. "It's insane."
The revenue projection issued Monday forecasts sustained economic growth through the end of 2005. The factors that could result in a cooling of the economy include inflation, rising gasoline prices and a possible rise in interest rates.
--Times staff writer Carrie Johnson contributed to this report.
