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State Govt. Needs to Invest, Not Just Balance the Books

Mark Howard
Mark Howard,
Executive Editor

Each Thanksgiving, my children and I drive to North Carolina to visit their grandparents. To save time on the last leg of the trip, we leave the interstate and drive on state highways through South Carolina and then over the border onto state roads in North Carolina. It has become a ritual part of our trip to note how markedly the roads improve at the state line — North Carolina’s roads are noticeably smoother, better maintained and better marked. Driving north of the border feels more comfortable and safer.

People who know the state better than I say road conditions have slipped since the days when it first gained a reputation as the “Good Roads” state. And the North Carolina Department of Transportation, long criticized for inefficiency and political patronage, is currently the target of a reform effort by the governor. But as a casual, if interested, observer, I have a sense that North Carolina still puts a high value on having a decent transportation system. Likewise higher-ed: Despite huge pressure on funding during the recession, UNC-Chapel Hill and other schools in the system have retained their reputation as among the country’s best, both pound for pound and in absolute terms.

Whatever else North Carolina may be good at, or not so good at, its focus on transportation and education has given a measure of direction, purpose and character to the way it spends taxpayers’ money. The result is that at least a significant part of that state’s “spending” has taken on the sense of “investing.” Government may not create wealth, but it sure as heck helps, since the way it spends has a great deal to do with how well goods and services move around and with the quality of the workforce that’s available to businesses.

When the Florida Legislature convenes next month, I suspect there won’t be much talk of “investing,” but rather only of arithmetic. The governor’s budget director has told state agencies that a small increase in tax receipts appears to be materializing but that increases in Medicaid spending alone will swallow it. The state will need to find some combination of expense cuts and tax increases that adds up to possibly as much as $2.6 billion, he says.

Smart people are hard at work on making those numbers add up. I recently heard Rep. Dean Cannon, slated to become Speaker of the House in November, deliver a candid and competent outline of the challenge of balancing the state books. Meanwhile, Florida TaxWatch, to its credit, has organized a cost-savings task force to recommend ways for government agencies to eliminate waste and provide the same services with less money.

Maybe arithmetic — book balancing — is the best the Legislature can do this year under the economic circumstances. But it’s not good enough. When, exactly, will we decide to do better — to get off the good-times-bad-times roller coaster and make a statement about what we want to be good at as a state, rather than just getting by?

Florida Trend’s 50-year history features regular cover stories that have outlined the shortcomings of Florida’s tax structure. You can line bookshelves with official studies featuring similar analyses: “A major portion of state revenues in Florida are structurally inadequate to deal with the present and future needs of the state,” notes a dusty 1977 study by the state Department of Education.

Efficiencies like those TaxWatch seeks are fine goals, but the inconvenient truth is that Florida’s state government is actually pretty efficient already: 47 states have more state workers per capita than Florida, and Florida also posted the lowest payroll cost per taxpayer at $36 last year, compared to the national average of $56.

The fact that we’re operating a bargain-basement government only highlights how creaky the whole system is. There’s never been a year in Florida when adding new schoolchildren plus new required Medicaid recipients plus new state prisoners plus covering new constitutional amendments could be funded with normal revenue collections, according to one expert. The state’s economy simply never has produced enough returns for government to fund even the low levels of services that Florida provides. And since the 1980s, the Legislature has routinely used lots of non-recurring funds — including the 2005-06 explosion in doc stamp collections and the 2008-09 federal “stimulus” money — instead of recurring revenue to avoid confronting tax-system issues.

The doc stamp revenue, of course, fell back to traditional levels, the stimulus money runs out next year, and we’re running out of other non-recurring fiscal rabbits to pull out of the hat. Meanwhile, the state’s untaxed service sector continues to grow, while consumption of taxed goods moderates. The stress on the system will only continue to ratchet up, and even with an improved economy the budgetary crisis is likely to extend into 2011 and beyond.

For some, more taxes and more government will always equal an improvement, regardless if the government actually gets results or not. For others, all taxes and all government always represent a problem and never a solution. Florida needs leaders who won’t look just to split the difference, but rather smash that whole dynamic and engage the state in a discussion of what it needs to build a 21st-century economy and how we should pay for those needs. The state’s leaders simply have to take on taxes.

This is no behind-the-back argument for a state income tax or for some big expansion of state government. Driving home from Thanksgiving in North Carolina one year soon, I’d just love to cross the border and have a sense that my state decided to get good at something and figured out how to make it happen. That it figured out a way to invest rather than just do arithmetic.

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