[Times photo: Jennifer Davis]
Such success stories as Unaxis, a St. Petersburg maker of semiconductor equipment, and the higher-paying technology jobs it brought were not enough to significantly raise overall state wages.

By BARRY KLEIN, JEFF HARRINGTON and CURTIS KRUEGER
© St. Petersburg Times,
published November 14, 2001

chart The 1990s were a wondrous time for Florida, a decade of unparalleled prosperity.

The state created 1.6-million new jobs, enough to employ every adult in Tampa, Miami, Orlando and Jacksonville. Armies of tourists spent billions of dollars, flooding state coffers with record tax revenues. Property and housing values soared.

Why, then, did Florida fall even further behind the nation's other states in almost every category that matters?

The state dropped from 33rd to 40th in median household income. It fell from 24th to 38th in per student spending. Floridians were more likely to live in poverty and less likely to graduate from high school, more likely to be uninsured and less likely to breathe clean air.

In 1990, this state had the nation's highest crime rate. Ten years later, it had improved just one notch to 49th.

"We're treading water -- spending just enough to keep problems at bay," says Henry George White, who directed the state's Juvenile Justice Advisory Board in the 1990s.

"You make choices," says Dennis Ross, the former chairman of the state Board of Regents. "Florida made bad choices."

Joanne Roberts is one of the many people living with the consequences.

Roberts is the principal at Ridgeview High School in Clay County, a bedroom community of Jacksonville that boomed during the 1990s. The school long ago ran out of classroom space so almost two-thirds of its students are housed in portables. Most of them were built years ago for elementary school students.

"Just try to find space for computers and bookshelves. It isn't there," says Roberts, the school's principal since 1985. "Not when you're trying to squeeze 30 high school students into a portable built for little kids."

There are three major reasons Florida lost ground during what economists say was its most prosperous decade since World War II:

Much of the wealth went untaxed. Florida's tax structure is so ridden with loopholes that it exempts significantly more revenue than it collects.

chart Many of the new jobs were in the service economy, behind cash registers or inside call centers. Their relatively low pay is why the average wage in Florida is just 87 percent of the national norm. That's down from 91 percent in 1990.

The state's education system went from bad to worse. The high school graduation rate in 2000 was a dismal 52 percent, the second worst in the United States. Even Mississippi and Alabama spent a higher percentage of their budgets on education.

The bottom line is unmistakable: While Florida's leaders spent much of the decade talking about investing in the future, they spent only enough to accommodate the state's substantial growth.

That approach could be an issue in next year's governor's race, especially if Florida's economy continues to decline.

Legislators are now struggling with a $1.3-billion budget deficit, the product of an economic downturn that became even deeper after the terrorist attacks of Sept. 11.

It's quite possible that Florida's window of opportunity already has closed.

'What if . . .?'

It wouldn't be the first time this state has missed a chance to make up lost ground.

In the 1960s, the space program was supposed to ignite a huge demand for scientists and engineers, many of whom would be educated at Florida universities. But most of NASA's best jobs ended up in Alabama, Texas and California.

Florida now ranks last among the 50 states in the percentage of Ph.D. scientists and engineers in its work force.

During the late 1970s, IBM developed the first commercial personal computer in a leased warehouse in Boca Raton. The city was soon calling itself the "PC capital of the world"; IBM employed almost 10,000 people there in the mid 1980s.

But the company found greener pastures in Raleigh, N.C., and Austin, Texas, both of which are now high-tech centers. The number of IBM workers in Boca has dwindled to fewer than 1,000.

"Florida is where the PC revolution began," says Mark Vitner, an economist with First Union Corp. "It makes you wonder, 'What if?' "

The 1980s presented two more opportunities: the state lottery and the services tax.

The lottery was sold to voters as a way to enhance education. But lawmakers used the billions in profits to replace -- not add to -- existing funding, enhancing voter cynicism a lot more than Florida's schools.

The services tax was a disaster. It was supposed to broaden the state's revenue base by taxing services provided by lawyers, advertisers and other professionals. But a public relations assault led by many Florida newspapers -- though not the St. Petersburg Times -- forced a hasty repeal.

The flip-flop crippled the governorship of Bob Martinez, a Republican who had dared to buck Florida's powerful business interests. It also sent a clear signal that meaningful tax reform was off limits.

Since 1924, Florida's Constitution has barred an income tax. And during the 1990s, lawmakers approved at least 92 different exemptions to the state sales tax, which provides most of Florida's revenue.

Fish breeders were among the many business interests that got off the hook. So were printing suppliers, magazine inserters, cattle growth enhancers and the people who lease stadium skyboxes.

According to the Florida Tax Handbook, the 91 exemptions cost the state about $800-million last year. That's the same amount lawmakers chopped during their recent special session.

"The Republican philosophy has been to cut taxes, and that's resulted in less money being available," says state Sen. Don Sullivan, R-Seminole, who was talking specifically about education funding.

Sullivan isn't saying that's a bad thing; Republicans are proud of their efforts to shrink government -- a major reason Florida lost ground during the 1990s.

But they didn't do it alone.

Assessing blame

Democrats controlled state government from 1990 to 1994 and held the governor's office until 1998. Florida voters approved term limits in 1992. That limited state lawmakers to eight years in office but exacerbated the state's short-term mentality toward its many long-term problems.

Meanwhile, many of Florida's business leaders were playing both ends against the middle.

Corporate executives complained mightily about the sorry state of Florida's work force, which they blamed on inadequate support for education. But they still lobbied hard for tax exemptions that helped their bottom lines.

"The business community deserves substantial blame for what happened here," says Dennis Ross, the former regents chairman and one-time CEO of Celotex, a Fortune 500 company in Tampa.

"It's easy to be on the outside throwing stones," says Jim Horne, Florida's secretary of education. "Everyone is part of this, including our business leaders. You can't isolate yourself and say, 'Woe is me.' "

Horne, a former Republican state senator, says he is unconcerned about Florida's low rankings compared with other states. He says many of the comparisons miss the big picture, especially those that focus on funding.

In education, he says, the best gauge of progress is student achievement, not government spending.

"If you look at student tests results, I think you'll find little correlation with spending," Horne says.

He may want to look again.

The National Association of Education Progress administered exams during the 1990s that made it possible to compare student achievement across the 50 states.

Thirty-seven of those states spends more per student on education than Florida.

The students in 32 of them scored higher than their Florida counterparts.

[Times photo: Jim Damaske]
The village of portable classrooms at Ridgeview High in Orange Park is emblematic of the state's problems, including a graduation rate of 52 percent, second worst in the nation.

But critics of state rankings do have a point. Relative measures don't reflect real spending, which increased every year in Florida. And some problems that cost the state ground were outside anyone's control.

Florida staggered through a deep recession in the decade's early years. There was a huge run-up in federally-mandated Medicaid costs. Most important, there was substantial growth; Florida added more than 3-million people during the decade, an increase of almost 24 percent.

That was great news for the growth industry, which along with tourism is the state's largest.

"It's building new homes and roads and shopping centers and schools," says Vitner, the First Union economist who has written extensively on Florida's economy. "Building and insuring those things is a huge industry, twice as big as it is for the rest of the country."

But growth also swelled costs across the board, making it hard for Florida to gain ground.

The average pupil-teacher ratio in Florida schools dropped from 39th in the nation to 43rd. The percentage of Florida's population that completed four years of college fell from 27th to 36th.

"These things have real consequences for our economy," says Peter Panousis, director of the High Tech Economics Center at the University of Central Florida in Orlando. "They need to change."

Dialing for dollars

Few people are as outspoken on this topic as Steve Raymund, chief executive of Tech Data Corp., the Tampa Bay area's largest publicly traded company.

Raymund has said for years that recruitment at his computer distribution company is hampered by low-quality public schools and a shortage of "high-tech, high-knowledge" workers.

"This is a Class B market, not Class A like Boston, Chicago or San Francisco," Raymund says.

Unless you run a call center. In that market, Florida is big league all the way.

Between 1997 and 1999, more than 11,000 call center jobs were created in the Tampa Bay area. That's more than in any metropolitan area in the country.

The jobs don't pay particularly well. When Tampa first emerged as a call center magnet in the early 1990s, workers earned $17,000 to $18,000. Now they average about $23,000.

That's a far cry from the wages earned by high-tech employees, and a major reason Florida residents started the 1990s with disposable incomes slightly above the national average but closed the decades with incomes slightly below.

Andy Shapiro, a New York-based relocation consultant who specializes in call centers, says there are other reasons for Florida's low wages. The state attracts a large number of unskilled and unemployed transplants. It still has lots of low-paying jobs in agriculture and home health care.

And in at least the Tampa Bay area, Shapiro says, employees have begun moving up the call center food chain.

The area started with the typical outbound centers: telemarketers calling people at home during dinnertime to pitch products.

But newer jobs involve inbound centers where employees have more expertise -- and are better paid -- because they answer technical questions from callers.

Still, those are hardly the jobs the Florida Chamber of Commerce envisioned in 1989 when its leaders issued a report calling for the creation of a "high-quality, value-added" economy.

They said it was particularly critical to improve technical training and increase the percentage of college graduates.

Neither happened. The numbers, in fact, have actually gotten worse.

Cheap and proud of it

For much of its history, Florida used migration to offset its education and work force inadequacies.

"We imported a lot of our workers from the Northeast and Midwest, where they have excellent education systems," says David Denslow, an economics professor and director of policy studies at the University of Florida.

But during the 1990s, those workers either stayed home or looked elsewhere. Florida's jobs no longer paid enough to attract them.

"Now we're having to rely increasingly on our own education system," Denslow says. "That's not a good thing."

State lawmakers aren't helping.

A few years ago, outgoing university system Chancellor Charlie Reed described the Legislature's attitude toward education this way: "Humiles sumus et quoque superbi."

That's Latin for: "We're cheap, and we're proud of it."

During the 1990s, Florida fell from 26th to 29th in teacher pay; from 36th to 49th in per capita spending on education; from 44th to 46th in the percentage of government spending dedicated to higher education.

Florida is even losing ground in the deep South, an area long considered an academic backwater.

Georgia provides more financial aid and pays higher salaries to university professors. Arkansas and Mississippi are spending considerably more per student on their colleges and universities.

Florida's penny-pinching is particularly self-defeating in the area of post-graduate education.

Competition for top graduate students is fierce. They help attract prominent researchers who bring in millions of dollars in contracts and grants, which supports the work that leads to commercial innovations, which creates new businesses and higher-paying jobs.

It's called a virtuous cycle.

But in Florida, the cycle is missing a major component -- sufficient state money to attract the top graduate students who start everything spinning.

Dale Johnson, the graduate school dean at the University of South Florida, says this is what he would tell student applicants if he were required to make full disclosure:

"We're ready to offer you a stipend that's several thousand dollars less than what you would receive at other universities. We won't offer you health insurance like other places, and we'll probably waffle on our ability to pay all your tuition."

That last piece is especially problematic for Florida.

One of the key components of a graduate student's financial package is the university's promise to pay the tuition. But unlike many other states, Florida insists its schools pay out-of-state rates for every graduate assistant who is not a legal resident of Florida. That almost quadruples the cost to the universities.

"About 50 percent of our graduate students are out-of-state or international," says Kenneth Gerhardt, the associate dean of UF's graduate school. "It makes a big difference."

But so do quality and reputation. The harsh truth is that Florida can't compete even when money isn't a factor.

Every year, the National Science Foundation selects 800 of the nation's top students in science and engineering for pre-doctoral fellowships. The fellowships pay for three years of studies anywhere the student wants to go.

Last fall, 270 of the students who were selected enrolled in California universities. Six enrolled in Florida.

chart

Colonizing Florida

In the 1990s, the Tampa Bay area lost its phone company (GTE) and a top power company (Florida Progress) to mergers.

St. Petersburg's Home Shopping Network became part of a New York conglomerate. Florida also lost most of its home-grown banks; for all purposes, the state is now a banking colony.

But while out-of-state giants like Northern Trust and Bank of America quickly dispatched investment managers to Florida in search of millionaires, they were slower to send loan officers who could help small and emerging businesses jump to the next level of growth.

In the 1990s, Florida was first in the nation in business starts, with 109,355 new companies. But at decade's end, it was fifth in bankruptcy filings.

Dan Mahurin, chief executive of SunTrust Bank's Tampa Bay operation, says out-of-state lenders are getting a bad rap.

Investing in small business is "one of our healthier markets," he says. "You have more start-ups, you're going to have more failures."

But mergermania has taken a toll.

Many of the Tampa Bay area's most important development efforts of the 1990s -- from landing a Major League Baseball team to expanding the high-tech corridor along Interstate 4 -- were led by the CEOs of home-grown companies. They include executives such as Jack Critchfield of Florida Progress and Dan Doyle of Danka Business Systems.

But Florida Progress is now part of a North Carolina conglomerate. And Doyle is gone from Danka, which is more concerned about salvaging its business than community involvement.

While it is difficult to measure the impact of a vacuum, some signs are clear. Bank of America, for example, expects its Florida operation to generate significant profits for the corporation, but its biggest civic projects still go to its hometown of Charlotte, N.C.

Joe Richardson was president of Florida Power Corp. until it was acquired last year by Carolina Power & Light. He is now a consultant and chairman of the Cornerstone Executive Steering Committee, an arm of the Florida Chamber of Commerce.

Since 1989, the Cornerstone committee has been producing reports filled with stark warnings about the state's economic and education inadequacies. The latest is expected to be released today.

Its findings, Richardson says, track those described in this report -- that Florida has lost ground in key areas, especially to "progressive and forward-thinking" states like California and Texas, which Florida badly wants to emulate.

"We haven't made a lot of positive movement," he says.

-- Times researcher Barbara Oliver contributed to this report.

About these stories

The St. Petersburg Times interviewed more than 60 people for these stories, which are based on rankings compiled from a variety of sources, including the U.S. Census, the U.S. Department of Education, the U.S. Department of Commerce and a number of state agencies.

In some instances, different sources reported slightly different rankings for the same measure. But a ranking was used only if all of the sources indicated the same trend line, whether up or down.

Most of the rankings compare 1990 statistics with the same measures for 2000.

The Times also consulted several non-governmental sources, including reports issued by the Florida Chamber of Commerce Foundation, the National Association of Education Progress, the Urban Mobility Steering Committee and State Rankings 1992 and State Rankings 2001, both published by Morgan Quitno.

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