BRADENTON, Fla. — The Florida Senate on Tuesday will take up the final reading of a resolution that could place restrictive spending measures into the state’s constitution.
The so-called Smart Cap is among the top issues the Republican-led Legislature began quickly moving through the approval process as the 60-day regular session got under way last week.
The measure is similar to Colorado’s controversial Taxpayer Bill Of Rights because it includes spending limits tied to inflation and population growth.
Sen. Ellyn Bogdanoff, R-Fort Lauderdale, said her proposal is more flexible because it includes ways the cap can be breached in times of stress but requires extraordinary votes.
Bogdanoff’s proposal differs from Colorado’s TABOR in that the revenue caps would include the revenues used to pay debt service on bonds issued after July 1, 2012. If passed by the Legislature and approved in a statewide referendum, the spending cap would be part of the state’s constitution.
Saying she was concerned about that affecting the state’s ratings, Sen. Gwen Margolis, D-North Miami Beach, offered an amendment during a second reading of the bill last week to remove the inclusion of debt service.
“You start showing the world that we’re going to limit our general revenue money and we are going to have a major problem selling bonds,” Margolis warned. Her amendment was rejected.
Bogdanoff said her research indicated that the spending cap would not affect the state’s ratings.
However, Gov. Rick Scott’s first budget proposal since his election in November could have a negative affect on the credit rates of the state and its school districts if his proposed tax cuts are approved by lawmakers, according to a report by Moody’s Investors Service last month.
Scott’s fiscal 2012 spending plan totals $65.9 billion, a $4.6 billion or 6.6% reduction from the current year, and is aimed at closing a $3.6 billion deficit as well as cutting taxes for businesses. Part of his plan would reduce funding for the state’s 67 school districts, which are already stressed because property values have plummeted over several years.
“The budget is credit-negative for Florida’s school districts,” said Moody’s analyst Nicole Johnson. “The plan incorporates expenditure savings in most of the state’s major policy areas, but school districts statewide would feel the largest burden because of local property-tax reductions and the loss of federal stimulus education funds.”
Johnson said tax cuts proposed by Scott exacerbate the budget gap since revenues have not recovered from years of decline, while other problems underpinning the state’s economy also will be slower to recover than most areas of the country. Those include high foreclosure rates and devalued homes, and a high unemployment rate, which was 11.9% in January.
Moody’s report surfaced at the state capitol last week where Scott was asked if he had considered the impact his budget might have on the credit ratings of the state or its schools.
“Well, I’m very comfortable that our budget is going to reduce the size of government, the cost of government, and we’re going to reduce taxes,” he said. “It’s going to put us on the right path to prosperity because, look, business people around the world are going to a place where they’re treated well. They’re treated well because they can get a great return on investment, they’re treated well because they have a government that understands ... them.”
The GOP-dominated Legislature may differ with Scott on some budget issues but they support measures to give business tax breaks and his goal of significantly reorganizing state government.
Some bills have been filed authorizing the issuance of bonds for various purposes. One would allow municipalities to create tax-increment finance districts to securitize sales taxes. Another bill would allow private developers to build golf courses and hotels in state parks and use bond financing for construction.
Other issues on tap during this year’s session include reducing jobless benefits to reduce the unemployment tax that businesses pay, comprehensive Medicaid reform, and major changes to laws that affect the state-run nonprofit Citizens Property Insurance Corp. and the Florida Hurricane Catastrophe Fund. It is not clear yet if the insurance bills will affect the credit rating of either agency.
