THE CAPITAL, TALLAHASSEE, Dec. 1, 2010 --
Republican Rick Scott got plenty of political mileage during the governor’s race ridiculing the Obama administration for running up the federal deficit.
But now the governor-elect faces his own tide of red ink – with taxpayer-financed, state government debt already at a record $26.4 billion, and climbing.
“It’s worth getting a grip on this,” said Dr. Randall Holcombe, a Florida State University economist, who the governor-elect has named to his economic advisory council. “The debt represents more money that’s taken out of the private sector, and that’s what will create more jobs and more income.”
The state’s Division of Bond Finance is scheduled to release a report this month likely to show another $2 billion in IOU’s added to state ledgers this year, powered by the cumulative effect of heavy borrowing for public school- and university-construction projects, roadwork and environmental land purchases, officials said.
Florida taxpayers spent $2.1 billion last year just to service the debt, double the level of 10 years ago. But that annual payment is expected to endure until 2014, when it’s forecast to fall to $1.8 billion a year.
With the state facing a $2.5 billion budget shortfall next year, the debt payments loom large as lawmakers struggle to balance a roughly $70 billion state spending plan. And the borrowing flourished even while Scott’s own party, which touts fiscal conservatism, held the reins of state government.
Since Gov. Jeb Bush took office in 1999, ushering in a decade of Republican leadership in Florida, state borrowing has climbed by almost $10 billion, with another $10.2 billion in debt expected to be issued through 2019 to cover currently authorized programs.
Major tax cuts enacted during Bush’s two terms and recession-driven budget reductions taken later helped steer lawmakers away from a pay-as-you-go approach in many areas. Unlike Congress with the federal budget, Florida lawmakers are constitutionally required to balance the state budget each year.
But borrowing to finance major capital projects is common. And the sagging economy and the state’s accumulated debt have drawn both “stable” and “negative” outlooks from rating agencies, potentially costing taxpayers more in recent borrowing costs.
Scott said little about Florida’s debt during the campaign. Instead, Scott blistered Democratic opponent Alex Sink for using “Obama math” to downplay the scope of her own spending proposals.
But on his campaign website, Scott warned that “Florida is going down the path of California and Greece,” with its borrowing. He also said the “career politicians in Tallahassee are spending our state into bankruptcy.”
With Scott a month away from taking office, his economic advisors say debt reduction should be part of his drive to rein-in state government.
“What the magic number is, I don’t know,” said Robert McClure, president and CEO of the James Madison Institute, another of Scott’s economic counsels. “You want to limit those programs that are going to cost the state a lot of money in the short- and long-term.”
A Scott spokesman, Trey Stapleton, said, “Anything that affects the Florida economy and getting people back to work will be a priority for the new governor.”
But it won’t be easy. And there could be a push for lawmakers to rely even more on borrowed money to maintain spending for public schools, favored university building projects, and transportation – seen by many analysts as helping spur job creation in a state with more than 1 million unemployed.
A ballot measure was rejected by voters last month that would have softened the state’s class-size standards, meaning classroom space in Florida will continue to be in demand.
Also, for all Scott’s talk of taking on state government, the core of those named to advise him also counseled Bush during the period when state borrowing rose steepest.
Scott’s economic advisory council is led by Donna Arduin, who served as Bush’s budget director and later held a similar post under California Gov. Arnold Schwarzenegger. Arthur Laffer, who shaped the supply-side economics of former President Reagan and is now Arduin’s business partner, is another Scott advisor.
“There is irony here, that President Obama was criticized for deficit spending when Republicans have been in charge here for all these years,” said Senate Democratic Leader Nan Rich, R-Weston. “When you wonder how did this happen in Florida, you’ve just got to look at the people in charge.”
Sen. Joe Negron, R-Stuart, vice-chairman of the Senate’s budget committee, said he agrees with Scott that state spending is not a driver of the economy. He said the incoming governor will find Republican lawmakers eager to cut.
“Just as we’re calling for the federal government to live within its means, Florida has to, as well,” Negron said.