Lawmakers kicked off the 2009 legislative session this week in Tallahassee. During the 60-day session, House and Senate members will be faced with the difficult task of balancing the 2009-10 state budget in a time of severe economic downturn.
Lawmakers have cut a total of $7 billion in spending from the state budget over the last two years and many are looking to make even more cuts this year, as revenue collections have consistently fallen below estimates. Florida is now officially a “zero-growth state,” with tourism numbers in a steady decline and population growth at a stand-still. While the exact amount of the budget shortfall will not be known until the next revenue estimating conference, scheduled for March 13, current estimates show a deficit of more than $5 billion for Fiscal Year 2009-10.
State of the State
Governor Crist spoke before a joint meeting of the legislature Tuesday evening to give his annual State of the State address. The Governor used the opportunity to promote his budget recommendations, which utilize federal stimulus funds to avoid cuts to education, health care and other programs. While he acknowledged that parts of the stimulus package are “not perfect,” the Governor believes the need for federal aid is greater than any associated risk. Despite the dismal economic situation plaguing the nation, Governor Crist remains optimistic about Florida’s future.
Governor’s Budget Recommendations
Governor Crist released his Fiscal Year 2009-2010 budget recommendations late last month. The Governor’s proposed budget of $66.5 billion relies on $4.7 billion from the American Recovery and Reinvestment Act of 2009 (ARRA), signed into law by President Obama on February 17. The Governor’s plan includes over $25 billion for health and human services programs, nearly $22 billion for education, over $10 billion for transportation and economic development and nearly $5 million for public safety. The proposed budget also includes an increase of 22 different fees, which would net the state over $500 million. The fees include those for drivers’ licenses, vehicle registrations, state park entry fees, overweight truck fines and bottled water. The Governor also outlined several legislative priorities’ including an increase in state university tuition fees, legislation to streamline and reduce state professional licensing requirements, new property tax reforms and a 25-year compact between the state and the Seminole Tribe of Florida.
Reactions to the proposed budget were mixed among both Republican and Democratic lawmakers. The legislature’s approach to Florida’s budget deficit remains to be seen, but members of both chambers have shown a willingness to consider all options. While the Governor’s plan fills the budget gap by utilizing federal stimulus dollars, some legislators have expressed doubt about using temporary money for recurring projects. Many lawmakers would like to use the current economic situation to reorganize Florida’s tax structure and make lasting changes to how state revenues are collected. There are several options for increasing revenue that will be up for discussion this session.
American Recovery and Reinvestment Act of 2009
Florida’s share of the federal stimulus package was recently increased to $13.5 billion, which will be disbursed to the state over the next three years. The aid will boost funding for social programs like unemployment compensation and food stamps. There will also be much- needed help for Florida’s Medicaid Program. The plan increases the Florida Medical Assistance Percentage (FMAP), the federal matching funds for state Medicaid programs, from 55 to 68 percent. In order to receive the increase, Florida will have to restore previous cuts to the Medically Needy program as well as the MEDS AD waiver. Florida is also set to receive funding for transportation and infrastructure projects as well as K-20 education programs.
During his State of the State address, the Governor introduced Don Winstead as his Special Advisor on federal stimulus issues. Mr. Winstead’s duties will include tracking Florida’s stimulus dollars, assisting with the identification of projects for funding and maintaining communication with the appropriate federal offices regarding the use and receipt of the funds.
Options for Increasing Revenue
The state’s budget shortfall is forcing lawmakers to consider different options for increasing revenue. During session members will consider legislation to increase taxes on certain items, like cigarettes, as well as eliminate some tax exemptions currently in place.
Several bills have been filed to increase the state cigarette tax, which is among the lowest in the nation. Other options being considered are ending certain tax loopholes for corporations and imposing an internet sales tax. Members are also reviewing a list of sales tax exemptions which may be repealed, including skybox tickets for sporting events, tickets to certain theatre events and the sale of U.S. and state flags.
Governor Crist’s budget recommendations rely on legislative approval of a gaming compact between the state and the Seminole Tribe of Florida. The Governor entered into the compact, which would allow the tribe to have higher stakes slot machines and offer blackjack in their casinos, in 2007. However, the Florida Supreme Court declared the agreement unconstitutional because the Governor had not obtained legislative approval. The 25-year compact will be considered by the legislature this session and could bring the state billions in revenue if approved.
Other gaming operators and horse breeders throughout the state are urging lawmakers to reject the deal because it gives an unfair advantage to the tribe. Many fear the compact would put other operators out of business and cause a dramatic decrease in state revenues. Because other gaming facilities are not allowed to have high stakes slots and card games, they will not be able to compete with the Seminole casinos. While the tribe is pushing for lawmakers to support the deal, several members of the House of Representatives are committed to ensuring that it does not succeed. Many have expressed concerns that the benefits to the tribe far outweigh those to the state. However, the compact could create thousands of jobs over the next 10 years and will net the state millions for the 2009-2010 budget, which may make it hard for legislators to resist.
Despite the current fiscal crisis facing state and local officials, Governor Crist is once again pushing several property tax reforms.
The first is an amendment to end the “recapture rule,” a glitch in the Save Our Homes program which causes property taxes to rise even as home values drop. Senator Mike Fasano (R-New Port Richey) has filed legislation to protect homeowners from having to pay increased taxes when market values are declining. In addition, the Governor supports an effort to help businesses and enhance tax savings provided under Amendment One by reducing the growth cap on non-homesteaded properties from 10 percent to five percent. The Governor is also supporting legislation to provide fairness to property owners who protest a value assessed by a property appraiser.
The Governor is promoting legislative efforts to limit the ability of local governments to raise taxes. Legislation has been filed in both chambers by Senator Mike Haridopolos (R-Melbourne) and Representative Anitere Flores (R-Miami). The legislation limits increases in local revenues to inflation and growth and requires voter approval of additional revenue increases.
Florida Department of Education Commissioner Eric Smith spoke before the House Full Appropriations Council on Education and Economic Development this week regarding federal stimulus funding for education programs. There is still uncertainty about Florida’s share of the Federal Fiscal Stabilization Fund, which stipulates that state funding for education must be at 2005-06 levels. Because significant cuts have been made over the last three years, Florida is not in compliance with this requirement. However, Governor Crist has communicated with U.S. Education Secretary Arne Duncan about the issue and is planning to request a waiver.
The Governor is encouraging lawmakers to pass legislation to allow Florida’s 11 state universities to increase tuition. The legislation, sponsored by Senator Ken Pruitt (R-Port St. Lucie) and Representative Will Weatherford (R-Wesley Chapel), will increase the base tuition set by the state and allow universities to increase their tuition fees above that amount.
Lawmakers are also looking to expand the state voucher program, which enables low-income students to attend private schools.
In the federal stimulus package, Florida is set to receive funding for highways and bridges, transportation enhancement projects, public transit, aviation and high speed rail projects. State Department of Transportation Secretary Stephanie Kopelousos also addressed the House Full Appropriations Council on Education & Economic Development this week regarding the federal plan. Secretary Kopelousos discussed several provisions in the legislation including a requirement that the state must use 50 percent of the funding within the first 120 days or it will be sent elsewhere. Funds will be sent separately to FDOT and local governments for priority projects, which must be delivered expeditiously and be completed within three years. Priority will also be given to projects within economically distressed areas.
There is $1.34 billion outlined for highways and bridges, of which $900 million can be used throughout the state. The remaining funds will be broken down based on population. Public transit dollars will be sent to local transportation organizations and authorities. There will also be $40 million in funding for transportation enhancement projects like trails and bike paths, as well as $8 billion for high speed rail corridor and passenger rail projects. Funds for aviation projects will be distributed directly to airports from the aviation office in Orlando. There will also be $1.5 billion for innovative projects, which will be distributed at the discretion of the U.S. Transportation Secretary.
Energy & Environment
Florida is set to receive a considerable amount of federal funds for “green” projects, including home weatherization and state grants for energy and conservation programs. The Florida Energy and Climate Office is currently considering the receipt and use of the funds.
Governor Crist is pushing lawmakers to ratify a renewable portfolio standard for Florida’s Public Service Commission. Under the new rule, each public utility will be required to produce 20% of its energy by 2020, using alternative energy sources like solar, wind and biomass.
Legislation has been filed to address the problematic Florida Medicaid Pilot Program. Representative Elaine Schwartz (D-Hollywood) is sponsoring a bill which would limit the state’s ability to secure funding from the federal government for the program. Many doctors within the five participating counties have dropped out of the program, which was created under former Governor Jeb Bush, because of bureaucratic problems and inadequate reimbursement policies.
Currently, one of the most significant issues relating to health care is the state Low Income Pool (LIP) Council. The Council, created as part of Medicaid reform to assist in the oversight of government funding for low-income health care, has come under heavy scrutiny in recent months and many are urging the legislature to abolish it altogether. Critics claim the program is giving up to $1 billion of taxpayer money to special interests. The members of the Council, all appointed by AHCA, have been criticized for directing the funds to facilities within their own districts. Legislation to eliminate the program was heard this week by the Senate Committee on Health Regulation. The legislation was amended to keep the Council, but prohibits lobbyists from serving on it, requires the AHCA Secretary or a designated staff member to serve as Chair, and adds six new members of the public (of which two must be licensed physicians).
There is also legislation to allow nurse practitioners in Florida to write prescriptions for potentially addictive drugs. Florida is one of only three states that does not allow this practice.
Lawmakers are considering legislation to ease current growth management requirements. Proponents stress the need for a more business-friendly state to promote economic development. The “growth management stimulus” legislation filed by Senator Mike Bennett (R-Bradenton), defines “dense urban land areas” as local governments with a population of 1,000 people per square mile. These areas would be exempt from transportation concurrency requirements as well as Development of Regional Impact (DRI) requirements.