New Revenue Cap Idea Advances in Florida

By: Michael Peltier, The News Service of Florida
By: Michael Peltier, The News Service of Florida

THE CAPITAL, TALLAHASSEE, Feb. 17, 2011 --

State taxing and spending would be tied to population growth and inflation under a proposal approved Thursday by a Senate panel over concerns raised by some about the possible effect on the state’s bond rating and ability to meet critical needs.

Following testimony mostly from critics, the Senate Finance and Tax Subcommittee on 5-2 vote along party lines approved the measure (SJR 958), a proposed constitutional amendment that would further restrict the state’s ability to raise revenue. Republicans voted for the measure, Democrats against.

Modeled after similar “taxpayer bill of rights” measures in other states including Colorado, the proposal would require excess revenue to be placed in reserve, used to reduce property taxes or somehow refunded to taxpayers as the plan phases in more restrictive revenue caps over the next several years.

Backers, including the Florida Chamber of Commerce, say the measure is needed to ensure tighter fiscal discipline while providing future Legislatures the flexibility to exceed caps to deal with pressing needs that may come up periodically.

“This is an opportunity for the Legislature to exercise fiscal constraint,” said Teye Reeves, the Chamber’s director of business climate and quality of life..

Critics representing the elderly, unions and the League of Women Voters said the proposal is politically driven to draw conservative voters to the polls, and financially imprudent.

Further, the state already has a constitutional revenue cap that has been in place since 1994.

“It’s kind of like people in the desert being told they need to buy flood insurance,” League of Women Voters spokesman Ben Wilcox said of the proposal.

The current cap prevents the state from raising revenue faster than the five-year average growth of personal income. Lawmakers can exceed that cap by a two-thirds vote.

The proposed amendment, sponsored by Sen. Ellyn Bogdanoff, R-Fort Lauderdale, would replace the personal income cap with a limit based on a five-year population growth average and an increase in the Consumer Price Index, a widely used inflation barometer. Lawmakers would again have the ability to exceed the cap with a supermajority vote.

“Keep in mind, we can bust the cap if we need to,” Bogdanoff said.

The provision drawing the most controversy Thursday would include bonded revenue within the revenue caps. Bonds are now exempt from the current constitutional cap. They would be included under the proposal approved Thursday.

Sen. Gwen Margolis, D-Sunny Isles Beach, said adding bonds to the cap could severely affect the state’s ability to borrow money when needed and could also make it more expensive to borrow because of the new restrictions on what it can spend, including to pay the debt back.

“I’m concerned about the bond rating,” Margolis said. “I don’t want that to suffer.”

A parade of groups rose in opposition to the measure. AFL-CIO representative Rich Templin cautioned against the need for the legislation. Government spending in Florida is among the lowest per capita in the country. They also argued that by cutting spending, state government is merely doing what families do when money is tight.

Templin argued that once families cut discretionary spending but still face bills that they must pay, they make other choices.

“We get a second job or we look for favorable credit,” Templin said. “We increase our sources of revenue.”

The bill is being fast tracked, scheduled for hearings in its final two Senate committees next week.


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