Scott Becomes Governor Vowing to Cut Florida’s Work Force by 5%

Rick Scott, a former healthcare executive who spent a record $78 million running for Florida governor, takes office vowing to cut the state work force by 5 percent to help close a $3.5 billion budget deficit.

Scott, 58, also plans to lower pension costs by $1.4 billion and slash $1.8 billion in expenses for Medicaid, the government health program for the poor. The Republican, who’ll be sworn in today in Tallahassee, promises to reduce property levies by 19 percent and phase out the business-income tax over seven years.

“Our government has grown too fast compared to the private sector,” Scott said in an interview on Bloomberg Television last month. “When that happens, jobs go away, so we have to reduce the size of government.”

Florida and other U.S. states face a combined $140 billion in budget deficits next fiscal year, the Washington-based Center on Budget and Policy Priorities said Dec. 16, as tax collections remain below pre-recession levels, according to the Nelson A. Rockefeller Institute of Government.

Florida’s projected 2012 budget gap has grown $1 billion from the $2.5 billion when Scott was elected in November. Unemployment that month of 12 percent was fourth highest in the country and 2.2 percentage points higher than the national average. That and a 41 percent decline in home values from 2006, according to the Federal Housing Finance Agency, have curbed tax collections.

The state, which has no personal-income levy, last month reduced its revenue forecasts for this fiscal year. General revenue in the year that ends June 30 will be 2.6 percent less than projected in August and 2.5 percent less in fiscal 2012.

“He enters office in a state whose economy is a wreck,” said Susan MacManus, who teaches politics at the University of South Florida in Tampa. “He has some rather grandiose ideas,” she said. “How far this legislature will go to enact what appears to be some very major shifts in policy” is unclear, she said.

Scott, who founded hospital chain Columbia Healthcare Corp. in 1987, said in his campaign he wants to cut costs partly by lowering the state’s payments to its retirement system. He would also consider shifting new employees into a 401(k)-style defined-contribution plan, in which benefits aren’t guaranteed.

He also suggested requiring retirement contributions from workers. Florida is one of six states, including Utah, Connecticut, Tennessee, Oregon and Missouri, where new employees aren’t required to pay into their pensions, according to the National Association of State Retirement Administrators.

Scott expressed concern that Florida’s pension, which said in June it had enough assets to cover 87.9 percent of its promised benefits, may be less-well funded. He said in an interview with the St. Petersburg Times that the fund’s assumed investment return of 7.75 percent annually may be too high.

Such a return is “going to be difficult unless you take more risk than pension funds ought to be taking,” he said in the interview, published Jan. 2. “If I was worried about my retirement, I’d be more cautious with my investing.”

Scott merged Columbia Healthcare Corp. with HCA Inc. in 1994. It grew to 340 institutions and $20 billion in annual revenue, according to his campaign website.

In March 1997, the U.S. government announced an investigation of the company’s Medicare-billing practices and Scott left soon afterward. The company paid more than $1.7 billion related to fraud in claims for Medicare, the government health plan for the elderly.

Scott joins other incoming governors, including New York’s Andrew Cuomo and South Carolina’s Nikki Haley, in proposing cuts to state Medicaid costs. Like Texas Governor Rick Perry, Scott favors federal grants that would allow states to allocate funds as they wish. Currently, states share costs with the U.S. government.

Cuts in payroll will save $300 million a year, Scott has said. Florida has the lowest ratio of employees to population among states, according to its 2010 annual workforce report. The personnel system employs 109,020 workers, with an additional 58,777 at other state agencies such as universities and the courts.

Scott said in the newspaper interview that he would examine how cutting the state’s workforce may affect the pension.

“But I’m not going to spend taxpayers’ money by keeping people employed to make a decision based on how the pension fund operates,” he said. “I’m going to make decisions on how you ought to run the state.”