Corporate Income Deal within Reach; Budget Deal, Not so Much

By: Brandon Larrabee, The News Service of Florida
By: Brandon Larrabee, The News Service of Florida

Tallahassee, FL - Gov. Rick Scott appeared on the cusp of a major political victory, with legislative leaders Monday expressing willingness to approve a variation on the corporate income tax cut Scott has persistently pushed.

The possibility of a corporate tax cut emerged even as other parts of complex budget negotiations reached an impasse.

The new proposal, as outlined by Senate President Mike Haridopolos, R-Merritt Island, would increase the exemption that business owners deduct from their tax liability from $5,000 to $25,000.

Haridopolos said the number would roughly halve the number of businesses that pay the corporate income tax and would likely cost between $30 million and $40 million.

A spokesman for Scott hailed the agreement and said a deal was essentially done with the House.

“Last night business owners were told their tax cuts were dead,” Brian Burgess said in an e-mail. “The Governor stood his ground and just 24 hours later it appears that half of all businesses in Florida will pay no tax at all.

“This will be a huge win for small business owners in Florida and a great first step toward completely phasing out the business tax over seven years,” Burgess said.

The plan is dramatically different than what Scott pitched during the fall campaign, when he pledged to reduce the corporate income tax rate paid by all businesses hit with the tax. But it still marked a major turnaround from just days earlier, when lawmakers were all but shoveling dirt on the centerpiece of Scott’s economic agenda even as the governor expressed optimism.

Haridopolos, who ruled out a 1-percent reduction in the tax rate, said he was willing to consider the exemption idea.

“I’m still open to that. But his plan, the 1 percent, I felt -- especially with the decisions we’re struggling with today -- would not be the best idea,” Haridopolos said.

But even as the tax deal seemed within reach, House and Senate leaders traded shots over other portions of the budget negotiations, dimming hopes that the 60-day legislative session would make its scheduled Friday conclusion.

While the size of the difference appeared to be a $150 million sliver of a state budget likely to weigh in around $68 billion, leaders on both sides of the Capitol expressed newfound skepticism that a deal would be done early enough on Tuesday to meet a requirement that lawmakers have 72 hours to read the spending plan before voting.

“It’s going to be a photo finish,” said House Speaker Dean Cannon, R-Winter Park.

Haridopolos seemed to offer even less hope, preemptively defending the second extended session in three years by pointing to the magnitude of the challenges posed by a $3.75 billion budget shortfall. Most of the disagreement now pivots on the health and human services portion of the spending plan.

“In the area probably with the most vulnerable people in the state of Florida, we’re having a heck of a lot of trouble finding the common ground,” Haridopolos said. “The fact that we’re at least temporarily at an impasse, it makes a lot of common sense to me,” he said.

Senate Budget Chairman J.D. Alexander, R-Lake Wales, and House Appropriations Chairwoman Denise Grimsely, R-Sebring, were less restrained in their comments about the showdown. Alexander said the House was proposing budget-stretching numbers in the health portion of the budget while attempting to push the upper chamber around.

The conflict arises from the allocations agreement Haridopolos and Cannon struck last week.

The plan set aside about $150 million less than the House -- and about $300 million more than the Senate -- for health and human services. Senate negotiators are demanding the House cut its budget, and not cut beyond what the Senate has earmarked for certain programs, before moving on.

The House late last week proposed cutting about $521 million from Medicaid rates for hospitals, while the Senate proposed $438 million in cuts.

The Senate, however, would save $192 million by eliminating hospital payments in the Medically Needy program, which serves people who have costly illnesses but don't qualify for Medicaid.

The House has refused to cut funding for the program, arguing that it will lead to hospitals getting stuck with providing uncompensated care.

In offers last week, doctors and nursing homes fared better with the Senate than the House. The Senate proposed spending $243 million to increase Medicaid payments for primary-care doctors, while the House did not include any additional money for doctors.

The House also proposed cutting $144 million from nursing-home Medicaid rates, while the Senate did not propose any cuts. On the flip side, the Senate proposed huge cuts in funding for adult mental-health and substance-abuse programs, while the House has largely shielded those programs.

Alexander said senators were trying to be understanding and deal fairly with the House.

“But there is a point where the Senate is here and we have an opinion. .... I don’t think the Senate can be just dictated to,” he said.

The House’s lead health care budget writer, Rep. Denise Grimsley, fired off a statement saying any suggestion that the House has ever gone over the budget allocations with one of its proposals is “misleading and untrue” and painting the conflict in far different terms.

“The difference between the House and Senate HHS budgets is that the House is trying to level fund critical needs and resolve deficits and the Senate is trying to fund political payback to special interests, member projects and early implement federal health care reform,” said Grimsley, R-Lake Placid.

Read a portion of Grimsley’s statement, Haridopolos said: “Again, this is why we’re not going along at this point on this issue.”


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