Sixty-five billion dollars is a lot of money. But when special-inter- est groups are used to getting $70 billion, it’s not hard to imag- ine the reaction when, as Florida’s newest governor, I rolled out my “jobs budget,” which called for reducing state spending by more than $5 billion, when a reduction of just $3.6 billion would have “balanced” the state budget.
While other states, such as Illinois, decided to raise taxes to close their budget gap, here is how I took the opposite tack by lowering taxes and dramatically slashing state spending.
First, I instituted accountability budgeting, forcing each state department to justify every dollar it spends with a specific, measurable goal associated with it. For example, the budget calls for $35 million in state-funded student aid. Next year, we’ll check to see if the program achieved the graduation-rate target that we set for those dollars.
For line items that don’t achieve their associated goal, we will make adjustments or even scrap the program and try something new. The most important thing is that we set clear, measurable goals; check progress; and make adjustments. Every project, every program, every dollar spent must prove worthwhile - or face the veto pen.
Second, I want to modernize Florida’s pension system. Florida is the only state in America where state employees do not contribute to their own pensions. The state pays into the system and guarantees the pension upon retirement. The system also allowed state bureaucrats to double-dip on taxpayers - drawing retirement benefits while continuing to work and draw a regular paycheck.
I will not let state workers double-dip on the taxpayers. The program, called DROP, has been dropped from my budget.
The third way I’m cutting state spending is to change the way our state does business. Florida’s reimbursement rates for health care providers are too high. By switching to a patient-directed system, Florida will save nearly $3 billion over the next two years, and patients will have more control over their health care decisions.
But by far the biggest challenge in submitting a balanced budget is finding a way to return $2 billion to taxpayers over the next two years, with the goal of turning around our state’s economy. The tax cuts come from two primary sources: phasing out the business income tax over the next seven years and cutting state property taxes for hurting homeowners. Overall, the budget returns $540 to each household over the next two years.
My goal is to make Florida the No. 1 business state in the nation. We will be the state for job creation. And the first step in that direction is to begin phasing out the business tax by reducing it from 5.5 percent down to 3 percent this year. Over the next seven years, we’ll phase it out completely. Already our state has seen job growth just from the potential of that tax cut being enacted into law. Last week, Bing Energy, a fuel-cell company based in California, announced it was moving its corporate headquarters to Florida, based in part on the promise of lower taxes. Florida was in direct competition with Illinois and Massachusetts, each of which offered millions more dollars in incentives upfront than Florida. But the company decided the potential business income-tax cut and business environment on the horizon for Florida far outweighed what other states could offer.
The result? Two-hundred-and-fifty new jobs are coming to Florida.
But even now, some lawmakers in Florida’s capital city are wringing their hands, unsure of how to cut both spending and taxes. They already are getting pressure from special-interest groups all across the Sunshine State that have grown accustomed to fat state contracts, bloated benefit packages and wasteful spending with no accountability.
Across the nation, other governors and state legislatures are facing the same dilemma we have here in Florida. Illinois decided to embrace bigger government as the solution. So, rather than cutting their state budget to close a $6 billion gap, state lawmakers decided to raise the personal income-tax rate by a draconian 66 percent. They chose to placate special-interest groups at the expense of individual taxpayers.
I believe Florida is on the verge of a historic expansion, the likes of which our state has not seen in centuries. Our state exploded in the last century because of tourism. The next wave in the Sunshine State will be driven by international trade, underpinned by the expansion of the Panama Canal, deeper Florida ports and the economic growth in Central and South America. Florida has an opportunity to seize the opportunity like no other state in America. Creating a business-friendly environment is the first critical step.
Rick Scott is the Republican governor of Florida.