Gov. Scott proposes $77 billion budget with $673 million in tax cuts

Florida Gov. Rick Scott speaks to the media during a pre-legislative news conference, Wednesday in Tallahassee. (AP Photo)
Florida Gov. Rick Scott speaks to the media during a pre-legislative news conference, Wednesday in Tallahassee. (AP Photo)
Published Jan. 29, 2015

TALLAHASSEE — Florida Gov. Rick Scott unveiled a proposed $77 billion budget Wednesday that spends nearly all of a $1 billion surplus on tax cuts and an increase in education spending, but it also cuts the state workforce further while shifting education costs to local taxpayers.

"It's a strong budget because our economy is strong," Scott told a day-long gathering of state reporters and editorial writers in the Capitol. "The way to make it stronger is return more money to the people."

While Republican governors in states like Michigan and Nevada are proposing tax increases to plug budget deficits, Florida's surplus allows Scott to push for cuts in state taxes and fees of $673 million.

Scott wants to exempt college textbooks from the sales tax, which would cost $41.4 million; increase the corporate income tax exemption from $50,000 to $75,000, which would eliminate that tax for 2,189 businesses and cost the state $18.4 million; and the permanent elimination of the sales tax on manufacturing machinery and equipment, costing $142.5 million. He also proposes another back-to-school tax holiday that would siphon away $33 million.

Scott's one broad-based tax cut that would affect most consumers would barely be noticed. He wants to slash the state's communications services tax, which is levied on cable, satellite and cell phone services by 3.6 percent, which would cost $470 million. (It won't alter what local governments collect from their share of the tax.) The savings for a typical family spending $100 a month on those utilities would be negligible: $43 a year, or $3.58 a month. Businesses would see larger savings.

Scott's proposed package fits with his prior four years of tax cuts and an overall mission to eliminate the corporate income tax. Florida's 5.5 percent rate ranked 38th lowest in the nation in 2014.

Scott says his proposed reductions are to make Florida a "global destination" for jobs, but states with lower rates are hardly known for their booming industry: Colorado, Kansas, Mississippi, North Dakota, South Carolina and Utah. (Six states don't have a corporate income tax: Nevada, Ohio, South Dakota, Texas, Washington and Wyoming.)

While most lawmakers endorse the biggest part of Scott's package — the communications services tax cut — they will consider competing tax cut proposals, such as a costly decrease in the state's commercial lease tax.

"We'd love to address the commercial lease tax," Senate Appropriations Chairman Tom Lee, R-Brandon, said last week. "Whether or not we can do the communications services tax and still address the needs of the Senate and House remains to be seen."

Scott proposes cost savings by cutting 1,353 positions from a total of 114,444 state jobs, a decision sure to disappoint many of his agency heads. For instance, the Department of Corrections, which has been battling an image problem after a spate of prison deaths, requested 654 new positions. Scott is proposing only more than 300 at an additional cost of $17.5 million.

The reduction in state positions will help save $93 million. The vast majority are vacant or soon will be because of attrition by July 1. The agency that will see the biggest decrease is the Department of Health, which would shed 758 positions because of "streamlined processes and administrative efficiencies."

Florida House Democratic Leader Mark Pafford said the drive to further reduce government was misguided.

"We're already the leanest state in the nation in terms of employees to residents," said Pafford, D-West Palm Beach. "If you're getting rid of these positions, what does that mean? These are important questions when we're seeking a better quality of life in this state."

A key part of Scott's proposal actually boosts spending: $19.75 billion for K-12 education, up from $18.9 billion in the current budget.

Those footing the bill, however, will be local taxpayers.

While the state will kick in $391 million, Scott's education spending plan relies on a $452 million increase in revenue that will be financed by keeping the local millage tax rate of 5.089 the same. While that's not a rate increase, most homeowners will pay more as their values rise.

Scott wants to boost per-student spending to $7,176. He touts the figure as a "record high," but critics point out that it falls short of the 2007-08 spending level if inflation is considered.

His proposed education budget includes a $33.5 million increase for early childhood education programs, a $40 million increase for classroom technology and a $14.3 million increase for school safety initiatives.

The plan prioritizes school choice, setting aside $23.4 million for scholarships for children with special needs and $100 million for charter school construction. It also includes $60 million in construction funding for traditional public schools, and about $100 million for construction projects in 10 small counties.

There is another $6.5 billion for the state college and university systems. Scott wants to boost performance funding for both. What's more, he wants a $23.5 million increase to Bright Futures scholarships so the awards can be used to cover the summer term.

Scott's proposed health care budget stands at about $27.3 billion — roughly the same amount as last year.

Health care spending is likely to play a central role in the upcoming legislative session. Come June 30, the state will no longer be able to rely on a pot of funding known as the Low Income Pool, under an agreement with the Centers for Medicare and Medicaid Services, a federal regulatory agency. Florida stands to lose $1.3 billion in federal funds to help hospitals treat poor and uninsured patients as a result.

Scott's proposed budget assumes the Low Income Pool funding will continue in 2015-16. "We're hoping that we can continue to work with the federal government in regard to that," he said.

If the situation changes, however, Scott will give the state Agency for Health Care Administration the authority to request trust fund money to cover the gap.

His proposal does not address Medicaid expansion.

For the past two years, Florida lawmakers have turned down $51 billion in federal funds to expand insurance to 1 million low-income Floridians. Business groups are now pressing the Legislature to reconsider.

Scott, who has expressed his support for Medicaid expansion in the past, offered tepid support for the measure on Wednesday, saying he would not "stand in the way." But he made it clear that Medicaid expansion would not be a priority for him in 2015.

Senate President Andy Gardiner said the Senate was interested in discussing the issue. He pointed to Indiana, which recently won approval from the federal government to use a state-specific Medicaid expansion plan.

"But we are also realists and we realize that we need a partner in this," Gardiner said.

House Speaker Steve Crisafulli said the House was not planning to do anything on Medicaid expansion.

But he left the door open. "I am a never-say-never kind of guy," Crisafulli said.

Scott has also proposed spending $150 million in next year's budget as part of a 20-year plan to dedicate $5 billion for Everglades restoration. He wants to use a quarter of the money from Amendment 1 — which voters overwhelmingly supported last year for land and water conservation — for the restoration work.

Overall, his budget provides $3 billion to agriculture and natural resources, spending $757 million for land and water programs from documentary stamp revenues.

Contact Michael Van Sickler at Follow @mikevansickler. Contact Kathleen McGrory at Follow @kmcgrory.