By Dara Kam Eds: For immediate release. c.2012 Cox Newspapers
TALLAHASSEE (Cox Newspapers) — Depending on who’s doing the analysis, a proposed amendment that would change the formula for limiting the amount of revenue Florida can collect each year from taxes and fees would either rein in willy-nilly government spending or cause Draconian cutbacks to education, roads and schools.
Florida’s constitution already includes a revenue cap aimed at curtailing state spending. But that limit, which hasn’t been reached since voters put it in the constitution in 1994, doesn’t go far enough, according to the Republican lawmakers who put Amendment 3, a measure they call the “Smart Cap,” on this year’s Nov. 6 ballot.
The existing cap limits the increase in state revenue in any year to the average annual rate of growth in Florida personal income over the previous five years. Amendment 3 would replace the 1994 formula with one that would limit each year’s increase in revenue to the average annual change over the previous five years in the U.S. Department of Labor’s Consumer Price Index times the state’s rate of change in population.
If state revenue were to exceed the limit in any given year, the amendment would require the excess to first go into a stabilization fund, then be used to reduce the amount school districts are required to pay the state to pay for education and, if any more remained, finally be returned to taxpayers.
According to the Legislature’s staff analysis of the proposed amendment, Amendment 3 would cap the state’s revenue in 2014 at $32.3 billion, compared to the nearly $50 billion cap under the current formula. State economists estimate that Florida’s actual revenue in 2014 will be about $31.6 billion, or about $657 million below the proposed cap compared to the $18.4 billion buffer remaining under current law.
The staff analysis also concluded that state revenues would only have exceeded the proposed cap once — during the real estate boom in 2006 — in nearly two decades, and it forecasts that state revenues would remain below the cap until 2020.
“What this is attempting to do is to stop those years where we had these huge increases in revenues and we just created government programs and started spending it instead of putting it away,” said Sen. Ellyn Bogdanoff, R-Fort Lauderdale, who sponsored the measure.
But another study shows that if the cap were in place today, the state would lose more than $11 billion in a decade. The formula itself is flawed, said Erica Williams, a senior policy analyst at the Washington, D.C.-based Center for Budget and Policy Priorities.
that tracks similar proposals nationwide.
“The truth is the population and inflation formula is not adequate to keep pace with what it costs to provide services that Florida’s residents, businesses and economy need,” said Williams, co-author of the analysis.
She said the problem lies in the use of the consumer price index to measure inflation. That’s because the CPI measures what people -- not governments -- spend money on, and they’re not the same kinds of things. People spend money on items like food, clothing and housing. Governments pay to build schools, house prisoners and provide health care for children and the needy.
She also said basing growth in part on population is also tricky, because increasing numbers of schoolchildren and seniors cost the state more money.
“Measures like this do nothing to make sure dollars are well-spent,” Williams said. “All it does is limit the overall amount available to spend.”
Colorado struggled with similar constraints
If the measure gets the 60 percent approval from voters required to pass, Florida would become the second state in the nation to pass a revenue limit tied to CPI and population changes.
But Colorado, the only other state to approve a similar cap, has already dropped its plan. Colorado voters put the “Taxpayers Bill of Rights,” or TABOR, into that state’s constitution in 1992 but suspended it in 2005 after it resulted in dramatic decreases in spending on public services including schools and universities.
Voters in four states and more than 30 other state legislatures have shot down similar proposals. And conservative Arizona Gov. Jan Brewer vetoed a similar proposal last year, saying Colorado’s failed experiment was a lesson.
But Bogdanoff said she built safeguards into her proposal that will prevent Florida from replicating Colorado’s fiscal fiasco.
Those include a so-called “glidepath” that gradually puts the new revenue limitation in place over four years and, most importantly she said, a “safety valve” that allows lawmakers to bust the cap in lean years.
“The decision that the voters have to make is: Do they want government to outspend the average citizen? So if we are employed and we get CPI in terms of our raises, that’s what we get to spend. But government has an unlimited bank account because all we have to do is tax people,” said Bogdanoff, who faces state Sen. Maria Sachs, D-Delray Beach, in District 34, the only race in the state where two incumbent senators are squaring off because of redistricting.
Unlike Colorado’s cap, the Florida cap does not apply to many revenue sources, including college and university tuition. And the Florida measure does not automatically “ratchet down” and reset during dismal economic years.
But nearly half of the state revenues -- including taxes, fees, licenses and fines -- that would be affected by the proposed cap are spent on public schools, college and universities, meaning funding for education could bear the brunt of the impact if revenues were to exceed the limit.
Opponents to rally today
A coalition of groups including the Florida Parent Teacher Association, League of Women Voters of Florida and AARP has organized opposition to the proposal. California-based PICO, a faith-based community group, has contributed $100,000 to the “No on 3” political committee to fight the amendment.
The proposal is “a wolf in sheep’s clothing,” said League of Women Voters of Florida President Deirdre Macnab, whose group is opposed to all of the proposed amendments on the Nov. 6 ballot.
“When we say it’s a failed formula, we mean it,” Macnab said, referring to the Colorado amendment. “Now Floridians have it dressed up to look like the apple in the Garden of Eden. And it really is a devastatingly bad idea.”
Florida business lobbyists favor the amendment but have not actively organized in support.
Outgoing Senate President Mike Haridopolos, R-Merritt Island, pushed the measure through the Legislature last year, saying it was the best way to rein in out-of-control state government spending.
And Bogdanoff insists the plan is good for Florida, pointing to the state’s recent economic woes as proof.
During the housing bubble in the mid-2000s, state lawmakers spent billions of extra dollars instead of socking the money away or reducing the amount school districts are required to contribute to pay for education, something her proposal would require. When the bubble burst, lawmakers were forced to slash billions in spending on critical programs.
“In a perfect world, you don’t really want a formula setting what the Legislature does,” said Kurt Wenner, vice president for tax research at business-backed Florida TaxWatch. “But it gives them another hurdle if they want to raise taxes. That’s basically what it boils down to. And that’s not necessarily a bad thing.”
Dara Kam writes for The Palm Beach Post. Email: dara(underscore)kam(at)pbpost.com.
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