To hear the talk from Tallahassee, Florida need do nothing differently to weather the worst economic crisis since the Great Depression. Gov. Charlie Crist's suggestions for dealing with a $2.3-billion shortfall during next month's two-week special session are the same old ideas that are neither bold nor visionary. He proposes cutting state agency spending across the board, draining state savings accounts, borrowing money to build facilities in lieu of paying in cash and ratifying the controversial gambling pact with the Seminole Indian tribe. Such a short-term strategy digs an even deeper budget hole for next year. There is a better way, and it involves raising some additional revenue.
The no-new-tax rhetoric from the Republican governor and the GOP-led Legislature masks the fundamental issue. The governor proposes spending more money this year than the state takes in. He would be able to do that only because the state saved money in the past. But Florida can't just raid reserves and resort to budget gimmicks indefinitely. In fact, Crist's proposal for the special session to once again tap the Budget Stabilization Fund and the Lawton Chiles Endowment Fund would leave roughly $1-billion in savings for a state budget of $66.2-billion. The budget hole anticipated for 2009-10: $5.8-billion.
That's no pittance. Consider the state planned to spend $2.7-billion this year to run its prison system, which employs more than 29,000 people and houses 100,000 prisoners, and $3.4-billion for its 11 public universities. The $5.8-billion budget gap would be the equivalent of 45 percent of this year's $12.1-billion operating budget for public schools.
Florida cannot cut its way out of this crisis unless the governor and state lawmakers are so callous they are willing to inflict more pain than necessary on residents who count on the universities, public schools, social services and other basic services from the state. The only responsible course is to combine targeted spending reductions with some additional new revenue.
In the regular session this spring, lawmakers should consider two significant changes in Florida tax policy that are long overdue: The taxing of goods sold on the Internet and the review of hundreds of sales tax exemptions.
But there are other options state leaders could consider during January's special session that would have an immediate impact on Florida's finances this year and next. None of these changes alone will solve this year's budget shortfall, but they would help shrink it and put the state in better shape for 2009-10:
• Raise cigarette taxes by $1, raising an estimated $700-million to $1-billion annually. The added benefit would likely be a decrease in tobacco consumption, eventually also reducing health care costs. The new money could be dedicated to social services such as Medicaid, the state health care program for poor children and the disabled. Florida's cigarette tax is currently just under 34 cents a pack, less than 43 other states and the District of Columbia.
• Increase the state's gasoline tax, now about 27 cents per gallon. A 1-cent increase would raise $104-million a year; 10 cents about $1-billion. Traditionally, gas taxes have been used to finance transportation projects, and that still could be a good use for the increase as an economic stimulus. But lawmakers could also direct new revenues to help fund state operations.
• Approve a gambling compact with the Seminole Indian tribe. As the Florida Supreme Court ruled, Crist should not have sealed an agreement without legislative approval. But now the Seminoles already have expanded gambling operations, and there is the possibility the state could wind up with nothing unless lawmakers sign off on the Crist compact or some revised version. The Crist deal would bring in at least $100-million annually and as much as $500-million in the future. The Seminoles already have started making payments toward their initial requirement of $375-million in the first three years. The money sits unspent in a state escrow account.
• Lift restrictions on local school boards' discretionary taxing authority. The Florida Constitution provides for school boards to levy property taxes of up to $10 per $1,000 in property value. But current state law effectively caps that authority at roughly $8. Lawmakers should allow school boards to vote individually to raise their tax rates to the constitutional maximum to recoup money lost from declining property values.
Many Republican lawmakers likely will dismiss these options as tax increases Floridians cannot afford. They likely will express hope that the federal stimulus package promised by President-elect Barack Obama will tide the state over. But federal money will be one-time cash in a worldwide economic crisis that is expected to last at least until 2010. What Florida is contemplating is the long-term erosion of basic state responsibilities, operations such as higher education, public schools, prisons and social services. Such cuts would cripple the state's economic future for years. The governor and the Florida Legislature cannot allow that to happen.