Florida Governor Strives to Cut Taxes, Spending

Published February 21, 2011

Nothing is business as usual with Florida’s new Republican governor, Rick Scott.

From selling state airplanes—”not a core function of government”—to the site chosen to unveil his proposed budget (a church in a small Central Florida town) this veteran businessman and rookie politician has from day one eschewed political and governmental bureaucracies and embraced free-market ideals.

In the first minutes of his inaugural address, Scott said, “Government has no resources of its own. Government can only give to us what it has previously taken from us—minus a huge cut for the government middleman. A lean and limited government has a role to play, . . . but prosperity comes from the private sector.” 

Tax and Spending Cuts
This philosophy is mirrored in Scott’s budget proposal. With Florida facing a $3.6 billion deficit and 1.1 million unemployed, he has proposed a budget that cuts spending and taxes and reduces regulatory burdens, with the goals of shrinking government, creating private-sector jobs, restarting economic growth, and holding government accountable.
Scott’s proposed budget has now dropped into the legislative hopper. Senator Don Gaetz (R-Destin) said, “We need to be sure the public policy choices we make are held to a rigorous return-on-investment standard.”

Senate President Mike Haridopolos (R-Melbourne) has said the Senate is “dedicated to working with the governor … to keep taxes low and live within our means.”

On the House side, Scott may face a slightly steeper climb. House Appropriations Chairman Denise Grimsley (R-Lake Placid) said she plans to “closely examine the governor’s budget as we work to address the many difficult decisions required during the appropriations process.”

Fiscally conservative business groups and policy organizations strongly support the proposed budget, viewing it as “a generational opportunity to completely reset [Florida’s] economy,” according to Mark Wilson, president of the Florida Chamber of Commerce.

‘Opportunity for Ingenuity’
Robert McClure, president of The James Madison Institute in Tallahassee, called the budget “an opportunity for American ingenuity and the free market to flourish.”

Critics, however, have been quoted in various news publications calling the budget “retreaded voodoo economics” and “a jobs-killing budget.”

New Proposals
Scott is attacking the problem on several fronts. In addition to the usual remedies—streamline state agencies, consolidate overlapping functions, eliminate wasteful spending, etc.—Scott’s budget also includes these items:

•    Reduce taxes by $4.1 billion over two years ($1.7 billion in 2011-12) including property taxes, fees, unemployment compensation taxes, and the corporate income tax (5.5 percent to 3 percent with a complete phase-out by 2018).
•    Eliminate more than 8,600 state jobs through attrition, returning job functions to local governments, privatization, etc.
•    Spend $800 million over two years ($300 million 2011-12) for economic development projects and incentives to develop private-sector jobs and business growth.
•    Freeze new rules and regulations (more than 900 pending) until reviewed.
•    Redirect selected trust fund monies into general revenue to allow more flexibility in the budgeting process.
•    Decrease education funding by $3 billion by not replacing expiring federal stimulus with state revenue.
•    Move Medicaid recipients into managed-care plans.
•    Require all existing members of the Florida Retirement System to contribute 5 percent of their earnings (currently employer contributions only) to retirement and all new employees to participate in a 401(k)-type defined contribution plan.

‘Matching Spending and Priorities’
Scott’s proposed budget “challenges a state Legislature that claims to be fiscally conservative to match his fiscal conservatism,” said Randall Holcombe, a professor of economics at Florida State University and senior fellow at the James Madison Institute. “More business-friendly states have more economic growth than less business-friendly states.”

McClure noted, “Often government budgets seem to operate on ‘automatic pilot’—spending follows revenue, up or down. Gov. Scott has introduced a different approach: matching state spending to state priorities. Undoubtedly reflecting his background in business, this refreshing new approach could well serve as a model for other officials charged with the responsibility of crafting budgets that consume taxpayers’ hard-earned money.”

Several of Scott’s proposals, such as Medicaid and public pension reform, are being watched nationally as possible models for other states.

Tanja R. Clendinen ([email protected]) is director of communications for the James Madison Institute in Tallahassee, Florida.