In November 2005, the Le Roy Collins Institute published a detailed analysis of Florida’s revenue prospects and service needs, entitled Tough Choices. The thesis was that Florida had been riding the revenue crest of a housing boom with the added kicker of hurricane rebuilding. We cautioned, though, that the boom would run its course, perhaps even crash. Florida would still face a full plate of service needs but a shortfall of revenue.
Within weeks of the release of our report, state revenue estimators found an added $1 billion for that fiscal year. Editorial writers treated our forecast, the work of economist David Denslow and political scientist Carol Weissert, with respectful attention. Official Tallahassee pooh-poohed it -- the good times were still rolling.
Without dwelling on “I-told-you-so’s,” we would say that Tough Choices was pretty much dead on. Revenue growth slowed drastically. Fortunately, Florida caught a couple of breaks with a surprising hiatus in K-12 enrollment growth and very moderate Medicaid growth. Still in 2007 -2008 and planning for 2008-2009, the state faces an obvious and painful budget crunch.
Our first report noted, matter-of-factly, that “property tax revenues for local governments soared as well” with the combination of a building boom and much higher valuations. Unnoticed, healthy increases in K-12 spending were mostly covered by the easily available funding for the local share.
What we did not fully anticipate was the crescendo of protest over rising local taxes. Some homeowners were hit with rapidly rising property taxes, and all faced huge increases in property insurance – a punishing double shock for many in the cost of home ownership. (At the same time, two quiet storm seasons put the Florida economy into withdrawal from the stimulus of hurricane rebuilding).
For this Tough Choices 2008 Update, we will not attempt any extended diagnosis or prescription for balancing this year’s and next year’s budgets or sorting out competing ideas for near-term tax relief. Instead, we will try to look out a bit further. What we see is decidedly mixed.
Economist Denslow predicts a powerful economic boost and revenue stimulus coming soon and lasting long as Baby Boomers retire. Solid evidence is appearing that Florida will attract many of the wealthiest of this huge cohort.
On the other hand, political scientist Weissert forecasts intensifying pressure on the spending side. Lulls in K-12 and Medicaid growth are more likely temporary than long-range. Other services – notably higher education – took a drubbing even in the good years and now are stretched dangerously thin.
At the end of this report we revisit our previous recommendations and offer some new ones.
When the three of us presented a version of this update to the Florida Taxation and Budget Reform Commission on November 1, 2007, several commissioners offered versions of the same question. What are the prospects for Floridians of middle and lower incomes? That may be the toughest challenge of all – how to balance the tradeoff between keeping taxes low and offering adequate levels of service. How can we make the state a great place for all of its residents to live – not just those who can afford a stunning waterfront view?
– S. Curtis Kiser, Chairman, LeRoy Collins Institute