Don’t Rely on Cuts Alone to Fix Florida’s Budget Crunch
By John Hall
Florida is in another budget crunch and has significant economic problems. Resigning ourselves only to cuts is a shortsighted approach to the challenges facing our state. Some budget cuts may be necessary, but those who care for the future of the state must raise their voices in favor of a balanced approach that includes revenues.
Unemployment is the highest it has been in 35 years, poverty and homelessness are growing, our health and education systems are some of the worst in the nation and our corrections budget is the only one that is increasing. Even those who have kept their jobs are struggling, and many of them are among the thousands of people who are on “wait lists” for critical public services.
In this recession, the needs of Floridians have grown at the same time the state has fewer resources to help them. State revenues are insufficient to meet the needs of struggling families and to make wise investments in our future. Early signs in Tallahassee are that the Legislature intends to address the problem by relying on cuts alone.
Oddly, the Legislature is also working vigorously to give revenue away to businesses for new tax breaks justified as incentives for job creation and economic expansion and diversification. Budget folks call these tax expenditures.
In other words, with one hand the Legislature intends to take funds away from services needed by families struggling in the recession, and with the other hand, give revenue to businesses. The state should take a hard look at existing tax breaks and view with skepticism new giveaways.
Public education and health care (Medicaid) are large components of the state budget and require about three-fourths of the general revenue. Therefore, those two areas of the budget are hastily targeted for cuts when there are revenue shortfalls.
Nurturing vs. Chopping
Florida’s educational system should be adequately funded, yet it ranks 49th in funding nationally. It needs financial nurturing, not budget chopping. The results of our poor investment in education are alarming. The school dropout rates are high, and among those who do graduate, too many bright students leave our state to go elsewhere to college to escape crowded classrooms and have more choices for fields of study. A recent national assessment of K-12 education systems (http://www.edweek.org/ew/qc/2009/17src.h28.html) across the country gave Florida the following grades:
• Student achievement (scores on national standardized tests): D-minus.
• Funding per student (compared to the national average): F.
• College readiness: F.
Greater investment in education is paramount to raising Florida’s achievement levels so we’ll hear better news about our grades in the next national assessment. It will produce a more highly skilled and talented workforce essential for businesses to expand and locate here. This is the best “economic incentive” that will support business expansion and relocation to Florida.
Health services for the needy (Medicaid) are the other prime target for budget cuts. Although more extensive and effective efforts to attack fraud are appropriate, the Medicaid program does not offer non-essential services or overpay physicians, hospitals and other health-care providers. In fact, studies have shown that Medicaid costs are 29 percent less than private insurance when controlling for differences in health status.
People’s Needs vs. Business Tax Breaks
Two other characteristics of the Medicaid program should be carefully weighed to fully appreciate how tough it would be to focus on health-care cuts to balance the budget. First, the elderly and disabled account for 69 percent of the expenditures, and that amount will grow with the mounting numbers of elderly in Florida’s population who need help with long-term-care services. The rise in unemployment is greatly increasing the Medicaid caseload and is also driving up costs. Second, state expenditures in the Medicaid program lead to significant matching dollars from the federal government. This increased spending helps the state to recover from the recession.
Are people’s health-care needs less important than tax breaks and tax loopholes for business?
We believe a balanced approach is the better choice. Instead of relying on spending cuts alone, the Legislature should also raise revenue needed to meet Floridians’ needs through closing corporate tax loopholes and eliminating unjustified tax expenditures.
John Hall is executive director of the Florida Center for Fiscal and Economic Policy in Tallahassee, a nonprofit organization conducting research on tax and budget issues with a focus on their impacts on low- and moderate-income Floridians and small businesses.
