Florida’s government must shrink to eliminate a $3.6 billion budget gap and create jobs, Governor Rick Scott said in his first State of the State address.
“Floridians have been encouraged to believe that government could take care of us,” the 58-year-old Republican told the Legislature in Tallahassee yesterday. “But government always takes more than it gives back.”
The former health-care executive and other U.S. governors are urging spending restraint to close deficits projected at $125 billion next fiscal year. Pennsylvania Republican Tom Corbett, 61, proposed a $27.3 billion budget that cuts outlays by $850 million. Ohio Republican John Kasich, 58, who also gave his first State of the State speech yesterday, wants to limit collective-bargaining by public employees to lower costs.
Scott’s $65.9 billion budget for fiscal 2012, proposed Feb. 7, trims 8,681 jobs, makes employees contribute to pensions for the first time and pares funds for Medicaid, the health-care program for the poor, by almost $4 billion. It also reduces property levies and the business-income tax, Florida’s second- largest revenue source.
“These tax cuts put money back in the hands of families and business owners who will grow private-sector jobs,” the governor said yesterday after the Republican-controlled Legislature concluded the opening day of its two-month session.
Scott founded Columbia Hospital Corp. in 1988 and merged it with HCA Inc. in 1994 to create the largest U.S. for-profit hospital chain. As governor, he’s sought to make Florida more business-friendly to lessen its dependence on the federal government and create jobs. The state’s 12 percent unemployment rate in December was 2.6 percentage points higher than the national rate at the time.
Scott’s first order after taking office in January was to bar state departments from creating new regulations. Last month, he turned down $2.4 billion of U.S. money for high-speed rail, saying taxpayers could become responsible for cost overruns.
“Business people in Florida and around the world are watching what we do,” Scott said. “They will be deciding whether to invest in Florida, based, in part, on our ability to work together to remove the obstacles to business success.”
During his speech, the governor introduced business executives he said were expanding in the state. Among them was Dean Minardi, chief financial officer of Bing Energy Inc., a California-based fuel-cell maker that chose Florida over other states in December.
“The reason Florida won? Mr. Minardi said it was our plan to eliminate the corporate tax,” Scott said.
Moody’s Investors Service warned on Feb. 14 that Scott’s proposed reduction in the corporate-tax rate to 3 percent from 5.5 percent may cause future deficits. It would lower revenue by $459 million in fiscal 2012 and $1 billion in fiscal 2013, Moody’s said.
The credit evaluator has a negative outlook on Florida’s general-obligation bonds, partly because of the state’s reliance on sales taxes, its largest revenue source. It rates Florida’s GO bonds Aa1, its second-highest grade.
Scott’s proposal to trim 2012 spending by $4.6 billion would be the most for Florida since at least 2002. The job cuts, about 7 percent of the workforce, and reductions in education spending sparked protests in the capital before his speech.
“These things are all disastrous,” said Summer Skye, 23, who drove from Orlando to protest outside the Statehouse. “Florida can’t afford these things.”
Tea Party members came to support Scott.
“What we really want is limited government,” said Henry Kelley, 45, president of the Fort Walton Beach Tea Party. “We’re here to remind the Legislature that we want them to stand fast on limited government and some fiscally conservative issues.”
Scott seeks to require participants in Florida’s $127 billion retirement fund, the nation’s fourth-largest, to contribute 5 percent of their wages to their pensions.
“We will bring Florida’s retirement system in line with other states,” he said in his speech.
The effort is supported by Mike Haridopolos, the Senate majority leader, who called the current system “the dinosaur we have nurtured” in remarks to lawmakers yesterday.
“We’re going to ask state employees to be in a similar benefits package as the private sector,” Haridopolos said in an interview after Scott spoke.
Making employees contribute to pensions allows the state to give companies needless tax breaks, Senate Democratic Minority Leader Nan Rich said in her party’s response to Scott’s address.
“Governor Scott wants to give large corporations and other wealthy CEOs more of our tax dollars,” she said. “This is after 12 years of Republican rule in Florida that gave these same special interests $19 billion in tax loopholes. Large corporations do not need more of our tax dollars.”
Scott also wants to expand a five-county pilot plan that puts Medicaid recipients into HMO-style managed-care systems run by companies paid fixed fees. He said that would cap costs for a program that grew 36 percent in Florida in the last three years to $20 billion, more than a quarter of annual outlays.
“Unfortunately, the federal government requires Florida to get approval before expanding the use of these innovative, cost- saving programs,” he said yesterday. “With or without the cooperation of the federal government, we will find a way to meet these health-care needs without jeopardizing other priorities.”
Republican Representative James Frishe called Scott’s message “right on point.”
“We’re going to try to provide the culture that develops private-sector jobs like the governor said,” Frishe said. “We have very common goals.”
© Copyright 2015 Bloomberg News. All rights reserved.