August 20, 2014

Taxes

The Federal Spigot

Even though Florida doesn't get its fair share, tax dollars keep pouring in from Washington.

Neil Skene | 8/1/2004
President Bill Clinton's memorable declaration in 1996 that "the era of big government is over" may have been as inaccurate as his declaration that he did not have sexual relations with "that woman."

Today, Gov. Jeb Bush is embracing a huge new flow of federal dollars for education, $5.4 billion next year, an increase of 50% since his brother became president, with new federal standards for "adequate yearly progress." The state's $310 million for the Scripps Research Institute project in Palm Beach County, a remarkable accomplishment for Bush, came from Florida's $948-million share of a $20-billion federal "fiscal relief" program for states. The voter-mandated bullet train Bush hates is clinging to life with $4 million this year, 80% of it from the feds. The Florida Department of Transportation eagerly awaits Congress' five-year reauthorization of transportation grants to states, which provides a third of Florida's transportation budget, and is hoping to eke out a little better formula than the one that is returning about 86 cents of every dollar of federal gas tax paid by Floridians. Even with a lousy formula, federal money for transportation in Florida is up about 30% since 1998.

You can almost hear Florida Republicans declaring, "Thank goodness for the federal government."

The governor's big brother has presided over a reinvigoration of Great Society approaches to federal budgeting, and money for Florida has risen with the tide. President George W. Bush boasts in his proposed federal budget for 2005 that education grants to states have increased 36% since he became president. Total federal grants for 2005, in constant 2000 dollars, are up $91 billion, or 32%, from $285 billion to $376 billion. That translates to roughly $3 billion more for Florida each year since 2000.

Falling short
There's one big problem, though: Florida still doesn't seem to get its fair share of federal money. The Legislature's Joint Committee on Intergovernmental Relations says that in fiscal 2002, the last year with figures available, Florida received about $15 billion in federal grants but ranked only 47th among the states when you divide the amount by population. The state did about 75% of the national average in grants per capita, a "loss" of about $322 for each person in the state. On the same per capita basis, Florida ranks 43rd in transportation grants, 45th in education and housing, 36th in agriculture, 50th in labor. (Grants are separate from direct payments to individuals, such as Social Security.)

Florida would be better off if the federal government just cut out all its grant programs, cut the taxes that finance them and let Florida raise its own taxes by the same dollar amount.

But don't hold your breath.

Not that Florida is helpless. Gov. Bush's administration has contracted with a private firm, Maximus, which says it can find as much as $500 million in federal money that may be slipping away from Florida because of flaws in grant applications and the way state programs are set up. The firm, based in Reston, Va., gets 4.25% of new money it finds for Florida. Right now, Maximus' main focus is health programs, including Medicaid (the fastest-growing part of Florida's $54-billion budget, increasing by double digits annually with heavy reliance on a federal match).

But some of the problem with Florida's poor showing in federal grants lies with federal formulas. Nowhere is that more evident than in transportation. In addition to a state gas tax, Floridians pay an 18.4-cent federal gas tax on every gallon of gasoline but get back less than 16 cents in federal transportation grants, about 86%. "Growth states are at a disadvantage," says FDOT Assistant Secretary Lowell Clary. The five-year transportation bill pending in Congress promises that every state would get 90.5% of what its residents pay, rising to 95% in 2009 -- but only after deducting several billion for more than 3,000 "earmarked" projects hand-selected by congressional leaders.

The formula issue, along with the president's effort to actually reduce transportation spending, is producing a huge fight -- "legislative road rage," Congressional Quarterly calls it. Florida is unlikely to do much better unless there is a bigger pot to share.

Small government?
Back in 1981, it appeared that this dependency on the federal largesse would decline substantially. Florida policy-makers were desperately trying to figure out what to do if President Ronald Reagan's commitment to smaller government cut the flow of federal money to Florida. Sure enough, federal grants to states fell by 18% from 1980 to 1985. (Florida taxes were increasing at the same time.)

But then the federal money started growing again. The federal gas tax, which increased under Reagan to 9 cents from 4 cents, doubled again under President George H.W. Bush to 18.4 cents. By 1995, grants were up 28% from the Reagan-era nadir and rose another 15% after Clinton's "big government" remark. George W. Bush's budget figures for 2005 are 30% higher than in Clinton's last year in office. (The conservative Cato Institute says Bush's spending record is "a worse record than any president since Lyndon Johnson.")

During much of the 20th century, the federal government used grants to coerce intransigent states to deal with poverty, roads, parks, housing and education, not to mention desegregation. Today, though, the federal government is mostly processing gazillions of dollars that flow in from people's paychecks and then back to states -- after a skim for the house, attachment of strings and a fuzzing of credit and blame.

Look at schools. Education happens in individual classrooms. Gov. Lawton Chiles didn't need a federal mandate to start the FCAT testing, nor did Gov. Bush when he converted it to a school-performance program before the similar federal program came along.

What if Florida just kept its money here? What if federal taxes were lowered and state taxes increased by the same amount? What if, to take the simplest example, 10 or 15 cents of the federal gas were simply shifted to the state gas tax so that Florida paid directly for its own transportation priorities without sending 14 cents on the dollar to Pennsylvania, New York and other states that get more than their money back? An Arizona congressman has proposed something like that but has only four co-sponsors. Clary at FDOT says Connie Mack, when he was the Republican U.S. senator from Florida, proposed something similar a few years ago.

That kind of "turnback" of tax money gets quite complicated, though, once you leave the transportation-style funding system of dedicated taxes and trust funds. If programs funded by general revenue were cut, the state would have to raise its own general taxes to keep the programs. In Florida, that would mean higher property taxes or sales taxes (a services tax?), an income tax (hush your mouth!) or, in Jeb Bush dogma, just dropping the program entirely. The political turmoil is unthinkable.

Meanwhile, the federal spigot keeps flowing, poorly apportioned, strings attached, but too alluring for national conservatives to let it go, or for states to resist.

Tags: Politics & Law, Around Florida, Government/Politics & Law

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