July 22, 2014

Legislative Preview 2008: Once Again, a Budget Crunch

Will a revenue shortfall prompt changes to Florida's budget and tax system this time?

Cynthia Barnett | 3/1/2008
If the economy weakens further, Baker says, decreased consumer spending could affect growth in sales tax receipts, which has been flat. Sales taxes account for about 75% of the state’s recurring annual revenue.

Meanwhile, state budget estimators note a trend toward slower rates of population growth, the economy’s primary engine. Population growth slowed to 1.8% in 2007 after hovering between 2% and 2.6% since the mid-1990s. Since 2005, Florida has slipped from second nationwide in state Gross Domestic Product to 12th. Unemployment, still below the national average, has risen to 4.7%.

Lawmakers will base this session’s trimming on new tax-receipt estimates due later this month. But prospects are bleak enough overall that the state estimates revenue will come in lower than it expected through 2011, says Baker.

Maybe this time?

As in past downturns, the crunch has left essential programs scrambling for operating funds. Florida Forever, the state’s land conservation program, has only $45 million left to spend; its approved acquisition list exceeds $11 billion. Environmental groups are proposing an amendment to create permanent funding.

Meanwhile, the Board of Governors that oversees Florida’s 11 public universities has responded to cutbacks by voting to raise undergraduate, in-state tuition and fees by 8% next year, about $186 more per year for full-time students. Florida’s university tuition is the cheapest in the nation. University presidents have long pushed politically unpopular tuition hikes as a way to fix the state’s student-faculty ratio of 31:1, among the highest in the nation. The national average is 25:1. The increase is far from certain, however, since the Legislature disputes the board’s authority to set tuition.

Like previous shortfalls, this year’s trouble also has refocused attention on tax reform efforts. The work of the state’s Taxation and Budget Reform Commission, constitutionally created to advise state officials and place amendments on the ballot, has taken on new urgency. Commission member John McKay, the former state Senate president who’s long worked to close sales tax loopholes, is pushing a plan to repeal $15 billion in exemptions on services and goods, from professional sports sky boxes to cattle growth enhancers.

All told, McKay says, the state is losing billions in sales tax each year. His plan would eliminate property tax funds for K-12 education except those that have been pledged for bonded capital projects.

Betting on a rebound

As for the immediate task of trimming a billion dollars or more, Crist’s proposed budget cuts $230 million worth of services and counts on big increases in gambling revenue. His proposals also assume increases in school property tax collections. Betting that the economy will rebound in a year, Crist also wants to raid dedicated trust funds, such as the state’s tobacco trust fund that pays for children’s healthcare, the workers’ comp trust fund and the insurance regulatory trust fund.

Legislative budget leaders aren’t keen on the idea. “It would be unwise for us to spend one-time monies on recurring expenditures in hopes that this revenue downturn will be short-lived,” Sansom says.

For their part, legislators appear likely to shift expenditures to areas they believe will stimulate the economy. Possible losers: State agencies; private universities, which get $3,000 tuition grants for Florida students; and private HMO providers that receive Medicaid reimbursements. Likely winners: Road builders, community colleges and job-training programs, all seen as crucial to stimulating the economy.

Dominic Calabro, president and CEO of Florida TaxWatch, which is working with the state’s business community on economic stimulus proposals, says he hopes lawmakers will concentrate on “tried-and-true” methods such as streamlined permitting to speed economic growth rather than new programs. “What can we do to encourage more capital formation in Florida?” Calabro asks. “The only thing certain is that throwing money at the economy won’t stimulate it.”

Tags: Politics & Law, Big Bend, Around Florida, Government/Politics & Law, Northwest

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