How Florida (!) Solved Its Budget Crisis

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From Looking at California from Florida by Randall Holcolme, The Independent Institute, May 27, 2009

As a Floridian, I’m looking at California’s budget mess with some amazement. The state’s 2009-10 budget is $111 billion, up 6% from the prior year, and $25 billion more than the year’s projected revenues of $86 billion. The budget’s expenditures are 29% greater than projected revenues! Yes, times are tough, we’re in a recession and all that, but during tough times shouldn’t we tighten our belts? Instead, California’s expenditures are growing at a fairly good clip, and 29% larger than revenues. This strikes me as crazy, and I’m happy to be saying this from Florida rather than California.

Things are tough in Florida too. In 2006-07 the state’s budget was $73.9 billion, but with the collapse in the real estate market, the recession, and the associated decline in tourism, revenues have fallen just like in California. The difference is, our state legislature has cut expenditures to match the decline in revenues, and Florida’s 2009-10 budget is $66.5 billion, a cut of more than 10% from its high a few years ago. And, the budget is balanced.

Florida’s legislature balanced the budget pretty much without raising taxes. There were a few “revenue enhancers” here and there—most significantly, a $1 per pack increase in cigarette taxes—but by and large the state held the line on taxes. Florida’s 6% sales tax rate (lower than California’s 8.25% rate) remained unchanged, and Florida never has had a personal income tax. Pretty much the way things went were, revenues fell, and the legislature cut expenditures to match the reduction in revenues. That’s fiscal responsibility.

People complained, of course, but the loudest complaints were from people who worked for the government, or special interests who wanted some particular program funded. You didn’t hear ordinary Floridians saying they wanted their state government to spend more. I’m giving our state legislature a lot of credit for holding the line on taxes and spending within their means. I don’t see that kind of fiscal responsibility at the national level, or at the local level (in Florida, local governments are all scheming for ways to raise more revenue and increase their spending). And, looking all the way across the country, I don’t see it in California.

I watched with interest (actually, morbid curiosity would be more descriptive) last week as Californians voted down the state’s proposed solution to the budget crisis. I would have voted against the state’s plan too. Now I’ll be interested (I mean, morbidly curious) to see what California’s legislature has up their sleeve as Plan B. Fortunately, Florida’s political leadership shows more responsibility. Sacramento is 2,700 miles from Tallahassee, and I confess I don’t follow California news that closely. But I really don’t understand how California’s political leadership can put the state in that much fiscal peril and still remain in office.