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2005 Report Predicted Budget Shortfall, But Lawmakers Ignored It

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By TED JACKOVICS, The Tampa Tribune

Published: September 30, 2007

TAMPA - Two years ago, with Florida awash in tax dollars generated by a sizzling housing market, a nonpartisan public policy group forecast that when housing growth inevitably declined, the drop in tax revenue would mean the state would struggle to provide adequate services to its residents.

The response in Tallahassee was predictable: Those in power largely disregarded the recommendations in the LeRoy Collins Institute's 'Tough Choices' report.

'It is hard to convince people there is a problem when there is no apparent problem at the time,' said Jim Apthorp, director of the institute, the state's pre-eminent independent policy group. 'There was a surplus of revenue, not a shortfall. But the report clearly pointed out the situation we were in.'

Two years later, the Legislature is faced with cutting $1.1 billion from the state budget in a special session. Property tax relief also is bound to affect state and local budgets.

'The services in the past were buttressed in part by a growing population and housing, so people did not feel pain with their choices,' said Florida State University political science professor Carol Weissert, a 'Tough Choices' author. 'Now that the housing bubble has burst, the situation has changed. You get what you pay for.'

'Tough Choices' focused on education, transportation, public safety, Medicaid, health, immigration, employment and retirees. The report's release in October 2005 prompted front-page articles in newspapers, but no response in Tallahassee.

'What 'Tough Choices' does is force you to understand that decisions you make today have an impact in the future, although there's no political incentive to do that,' Weissert said.

Because the housing surge generated additional sales tax money, Florida's elected officials were able to lower taxes while spending more on public services, said co-author David Denslow, a University of Florida economist. That is no longer the case.

'If you look at areas in the budgets, like roads, we are still way behind,' Denslow said.

The LeRoy Collins board pored over the research and forged recommendations drawn from years of experience from members such as Republican Curt Kiser, a former legislator and now a Tallahassee lawyer, and Democrat Buddy MacKay, a former lieutenant governor, governor and congressman.

The recommendations eschewed potential revenue windfalls, political hazards such as an income tax, or even another attempt to expand sales taxes. Instead, they were written to show ways lawmakers could take the initiative in leading Florida through various issues, rather than proposing strict remedies that could end up dead on arrival in the Capitol because of political unpopularity.

Two of the recommendations were nondescript - forming a commission to validate and expand the report's findings and organizing a study of Medicaid, which accounts for up to 25 percent of the state's budget.

The new commission would provide a 'long-range compass' for the Legislature that the 'Tough Choices' project launched with its research.

The Medicaid report would address questions of where the money was going and how to allocate money for the medically needy.

Other recommendations were more direct but gave leeway for the Legislature to take the lead toward changes in education, transportation and tax strategies.

One suggested modifying the class-size amendment. Former Gov. Jeb Bush tried unsuccessfully last year to roll back class-size limits.

Others included more funding for higher education, perhaps by focusing on the low tuition. Another dealt with raising money by establishing fees for single-occupant cars to use high-occupancy vehicle lanes created to relieve interstate congestion.

Still other recommendations included adding new construction to property tax rolls during building rather than after a once-a-year assessment and allowing local option sales, gas and property taxes.

The report differed from previous studies in addressing long-term trade-offs between revenue and spending while providing vast data that might encourage new ideas.

However, 'Tough Choices' did not go far enough for some.

'What I had hoped was that the report would have included specific recommendations regarding additional revenue sources,' MacKay said in an e-mail last week. 'This was not possible, since the board is bipartisan, and we had agreed that we would only include consensus items.

'Thus, the main value of the report is its predictions of surprise endings resulting from the interplay of Florida's economics and its demographics. That part, and its documentation, is extremely well done.'

In recent months, Weissert and Denslow have updated their research. They expect the LeRoy Collins board to consider additional recommendations soon. The Florida Taxation and Budget Reform Commission, which can place reforms on the ballot without going to the Legislature, is expected to review the report.

Denslow and Weissert have found some hopeful signs, but not necessarily long-term.

Medicaid expenditures have not grown as much as expected, perhaps a temporary anomaly resulting from revised federal guidelines. Fewer students appear to be entering public schools, which they say might be a result of parents moving to less expensive states as Florida's housing costs climbed. 'I don't anticipate the board will change any recommendations,' Weissert said. 'Instead I expect them to expand on them.'

Weissert is unconcerned that the special session is happening before the group's update is complete, reasoning that the original research still stands and that the Legislature is likely to attack 'low-hanging fruit' in making budget cuts.

Another of the LeRoy Collins board members, Tallahassee investment banker and lobbyist Lester Abberger, said it is important to recognize that incremental progress is often the best that can be done. 'Ultimately, we will have to take a look at the adequacy of a 1940s tax system for a 21st century economy,' Abberger said.

MacKay remains an advocate for taking a strong position. 'As I see it, the chaotic budget situation we now face is exactly what was predicted in the 'Tough Choices' report,' he said. 'Not only that, but I believe things will get worse before they get better.'

Reporter Ted Jackovics can be reached at (813) 259-7817.

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