Long-term planning same as it ever was

By Tim Nickens, Deputy Editor of Editorials
Published February 24, 2008

At least somebody saw it coming.

In the fall of 2005, the LeRoy Collins Institute published a forward-looking report appropriately titled "Tough Choices." Researchers from Florida State University and the University of Florida warned that the state's biggest housing boom since the 1920s would not last. They predicted growth in tax revenue would slow over the next several years as costs continued to rise for education, social services and transportation.

Shortly after Tough Choices came out, economists raised the state revenue estimate for 2005-06 by $1.7-billion. With tax money pouring in, legislators joked about the Collins Institute's timing and forgot about the report.

Nobody's laughing now.

The housing boom turned bust. Home foreclosures are at historic highs, unemployment is rising, and state revenue projections are falling. The Collins Institute is updating Tough Choices. Once again, legislators can be expected to ignore it.

"We plan the future one year at a time," House Speaker Marco Rubio acknowledged. "That's a horrible way to plan your state's future."

The long and short of it

Long-range vision never has been Florida's forte. In 1958, the St. Petersburg Times published an editorial headlined, "Great Universities Are Costly." It declared "a financially undernourished university cannot be expected to achieve greatness" at a time when Florida residents paid $75 per semester.

Fast forward 50 years. Florida still ranks near the bottom in per capita spending on higher education. Overcrowded universities are reducing enrollments and warning of layoffs because of the budget crisis.

It's not just higher education that Florida can't get right:

- In the 1970s, Democrats who controlled the Legislature debated whether to abolish local school property taxes and replace the money with state revenue. Three decades later, the debate continues even though property taxes now cover more than more than half of the cost of public education.

- In the late 1980s, the Legislature tried several times to raise gas taxes to build more roads and address billions in unmet needs. Republican Gov. Bob Martinez finally accepted a modest tax increase in 1990. But in 2008, the state is more than a billion dollars short in paying for road projects scheduled for the next five years and projects are being delayed.

- In the early 1990s, lawyer Karen Gievers filed lawsuits to force the state to find permanent homes more quickly for children in state foster care. She was back in court in January, filing another lawsuit against the state on behalf of a Hillsborough teen who has been shuffled through dozens of foster homes.

With Florida unable to meet so many of its basic obligations, let alone make improvements, it would be reasonable to expect some talk in Tallahassee of raising revenue and creating a fairer, broader tax system. But Republican Gov. Charlie Crist and the Republican-controlled Legislature won't discuss it. Crist just pushed through Amendment 1, which cut property taxes by more than $9-billion over five years, makes the system more unfair - and won 64 percent of the vote.

"People make no connection between taxes and services anymore. None," said Senate Democratic Leader Steve Geller of Hallandale Beach. "We have cut taxes in Florida to have just enough taxes to get by - provided we have the best economy in Florida history."

The problem

Why can't Florida get the vision thing?

Part of the problem is the way Tallahassee works. Safely drawn legislative districts, the influence of political contributions and term limits have produced a shortsighted Legislature incapable of embracing ideas that require short-term pain for long-term gain.

Another part of the problem is Florida itself. In 1990, Lawton Chiles won the governor's race as he talked about creating a community instead of a crowd. That has proven to be impossible in a diverse state with 18-million residents, nine television markets and two time zones. Two-thirds of the state's residents were born somewhere else, the population is aging and the cultural differences between Miami and Marianna often seem insurmountable. Building consensus on a long-term vision that requires shared sacrifice is a lost art.

"We are losing the concept," Geller said, "that we are all in this together."

Once and future crisis

As the Crist administration grapples with the current budget crisis, the governor and his aides remain confident that the situation is temporary. Jerry McDaniel, director of the governor's office of policy and budget, told legislators in early February that tax revenues should start increasing again late in 2008. Or in 2009. Or in early 2010.

"It's not a question of whether the economy revives but when it revives," he said. "We believe we have a 100 percent guarantee it is going to return."

There also is a 100 percent guarantee that state revenue won't come close to enabling Florida to tread water; any significant enhancements will be out of the question. The Legislature's long-range outlook projects that the gap between revenue and recurring costs will grow from $2.3-billion in 2008-09 to $2.8-billion in 2009-10 to $3-billion in 2010-11.

The demands for increased spending to run in place are familiar. School enrollment, which has been flat recently, will grow by more than 37,000 students by 2010-11. More than 13,000 additional prison beds will be needed by then, and Medicaid costs will rise by $1.5-billion.

Running in place means falling farther behind. Florida already ranks near the bottom nationally in public school spending per capita and high school graduation rates. It ranks near the top in the portion of residents who are uninsured.

As the Collins Institute points out, there are other trend lines to consider that warn of tough times ahead: The number of retirees will be rising as the number of working families declines; business' share of state and local taxes still will be higher than the national average; housing prices, while declining in most areas now, will remain higher than those of other large Southern states.

"Floridians, particularly the policymakers, need to spend more time on long-term views instead of this short-term stuff," said Curt Kiser, a former Republican legislator who is now a lobbyist and serves as chairman of the Collins Institute. "There's too much short-term thinking on how to solve these problems."

A state sell-off

In the Jeb Bush era between 1999 and 2007, the mantra was cut taxes and reduce the cost of government by privatizing services. That hasn't worked so well. The plug has been pulled on an effort to privatize accounting systems that proved to be an $89-million disaster. A contract to handle foster care in Pinellas and Pasco counties is not being renewed amid serious performance problems. An experiment in the Jacksonville and Fort Lauderdale areas to shift Medicaid recipients into private managed care programs, which Bush wanted to take statewide, has not produced clear savings. Its expansion is on hold.

Since Crist took office a year ago, the talk has shifted from privatization to selling assets. There have been discussions about leasing some state toll roads and selling the state lottery. The governor who did not support an expansion of gambling during his campaign is counting on it now for more revenue.

There also is renewed interest in shrinking the size of state government. Rubio, the House speaker from Miami, talks of consolidating state agencies to save money. State government certainly could be more efficient (consolidating computer systems, for example) and spend tax dollars more wisely (investing more in drug treatment to reduce the need for additional prisons, as Crist proposes).

But in the long term, Florida cannot meet the needs of its residents by reducing the size of government. It can't borrow its way out of trouble; the state's debt has more than doubled over the last decade. And growth, when it does return, will not pay for itself.

That leaves transforming Florida's tax system from one designed for the general store to one that recognizes the global economy. Among the most forward-looking options:

- Close sales tax exemptions on some goods and services. The state economy is based on delivering services, not producing goods. The additional money could be used to reduce school property taxes or address an obvious need, such as higher education. Is avoiding sales taxes on services such as dry cleaning or accounting worth telling high school seniors there is no room for them at the University of Florida or Florida State University?

- Expand collection of sales taxes on catalog and Internet sales. The Streamlined Sales Tax Project is aimed at simplifying tax returns and making tax definitions more uniform between states so Internet sales could be more easily taxed. Nearly half the states already have passed conforming legislation, and it is on the radar screen of Florida's Taxation and Budget Reform Commission. Why should sales tax be paid on a sweater bought at the mall but not on one bought over the Internet?

- Join some two dozen other states that use combined reporting for corporate income. This would enable Florida to tax a portion of an out-of-state corporation's profits that can be tied to the operation of its Florida subsidiaries. It amounts to closing a loophole that allows corporations to avoid paying state taxes here.

Why should states such as California, New York and Texas clamp down on this and not Florida?

House Democratic Leader Dan Gelber of Miami Beach plans to raise the issue of combined reporting during the legislative session. He probably will not get far when the Legislature's emphasis will be on just making it through the year. Meanwhile, the rest of the state waits for something more.

"Someone please articulate a vision for the state of Florida and a financing plan for us to get there," said Teresa Jacobs, an Orange County commissioner and president of the Florida Association of Counties. "We want a vision, and we want a financing plan."