In 2005, the LeRoy Collins Institute for Public Policy published a report titled “Tough Choices" pointing out that Florida's housing boom of 2000-2005 had given Florida a remarkable boost in revenue, allowing a massive shift in tax policy, a shift away from taxes on wealth and a shift of funding from the state to local government.
In the fall of 2005, the Collins Institute reported:
“But real estate booms like the current one inevitably slow, stop or, worst case, crash. We can't say when, how or how severe the end will be. Even the drivers of the current boom are something of a mystery. Various analysts cite a glut of foreign savings investments, the wave of condo conversions, speculative investors looking to flip properties for profit, and novel mortgage formats attracting marginal buyers. Taken together that looks to be a setup for a sharp fall eventually."
Now, most people recognize that this forecast was entirely accurate, as was the report's warning of a severe impact on state revenue.
At least since the Collins Institute report, we have known that we are facing significant shortfalls in revenue even as we experience significant demands on state funding, including those from pre-K-12 education and Medicaid. The constitutional requirements for implementation of the class size amendment and pre-K education will necessitate additional resources, and Medicaid's steady growth means that Florida will need an adequate tax base just to meet its existing obligations.
When we look at significant issues like teachers' salaries, adequate funding for colleges and universities, the sad, steady growth of prisons and the need for improvement for child care programs, we understand that the state has a long way to go in providing services most citizens support.
What would happen if Florida had other challenges" We now have state guarantees underpinning the Citizens Property Insurance program, and its reserves could be quickly wiped out by a major storm, a series of minor storms or, worse yet, both major and minor storms over several years. Only prayer seems to keep us from this disaster and, with a series of storms, even the retrospective assessment devices built into the legislation may prove to be so politically unacceptable that they will not be used.
What would happen if a series of large hurricanes was also accompanied by other events that harmed the Florida economy" It does not take much imagination to conjure up these possibilities. They include:
• The outbreak of a disease or disease scare. West Nile disease hitting Florida, particularly in major tourist areas, would dampen the tourist trade;
• The shift in the value of the dollar, removing the current incentive for European tourists to come to the United States;
• A real recession, accompanied by a crash of the stock market;
• Further escalation of gas prices, dampening tourist travel severely;
• A hostile attack or series of attacks in tourist areas.
We ought to consider how we can handle a crisis, particularly if several come together to create a severe challenge to the resources of the state. Today, we have so hampered the ability of government to collect taxes that we simply would not be able to deal with “stacked crises." We have built walls around the authority of government, not considering the consequences. We could face a situation where Florida, a wealthy state by many tests, would not be able to meet its obligations to its citizens.
Former Gov. Jeb Bush left office proud that there had been $14-billion in tax cuts, mostly to the benefit of wealthy citizens and corporate interests. During this period, efforts to close tax exemptions and loopholes in the corporate income tax were blocked.
These cuts in taxes and continued tolerance of exemptions and loopholes have left the Florida tax system a shambles. The steady increase in property values that sheltered tax cutting decisions has now, as predicted, come to a halt.
We may be able to muddle through the threats to public institutions. After all, the rankings of our public schools and universities will not get worse — we are already at the bottom when compared to other states.
If we are prudent, we will prepare for the worst and not leave government to be paralyzed by restrictions. A proposal, bounded with political constraints but flexible enough to allow officials to deal with a series of real problems that threaten the state with bankruptcy, is now before the Taxation and Budget Reform Commission for debate and consideration:
“Legislative power to address a fiscal crisis.
“(a) Upon certification by the governor that a serious fiscal crisis threatens the state, the Legislature shall have the authority to adopt by three-fourths vote of both houses, such measures as may be necessary to raise revenue, notwithstanding any other provision of this constitution.
“(b) Legislative acts authorized by this section shall expire two years from the date of the last certification of the existence of a serious fiscal crisis or earlier date specified by the Legislature."
Talbot D'Alemberte is a member of the Florida Taxation and Budget Reform Commission, former president of Florida State University and a former member of the Florida House of Representatives.