Tuesday, August 19, 2008

Crist: Use Reserves to Reduce Deficit

Facing a $1.4 billion projected hole in this year's budget, Florida Governor Charlie Crist has a simple message: stay calm. As the Palm Beach Post's Dara Kam reports, Crist is rejecting the notion of calling a special legislative session to deal with the deficit:
“No interest in that. The reason the legislature gave the executive branch the authority that they did was to be able to avoid that. And I think it was very smart...”
His reason? the projected deficit is, at this point, just a projection:
“It’s not a fact. I have to deal with facts. So I don’t want to go ahead and lurch ahead and use the totality of the reserve based on an estimate only because we get a new estimate in November,” Crist said.
This is, of course, true. Projecting economic growth and tax collections is a tricky business, and the only thing one can be sure of about the total amount of tax revenue Florida will have in the bank when the fiscal year ends next June is that it will not be exactly what folks are currently forecasting.

But there are several reasons why Crist should maybe be worrying a little bit more about this than he seems to be:
1) $1.4 billion is a big number. It's a lot bigger than, say, zero. And it's hard to imagine the economic turnaround that's going to make this number go away between now and next June. So to say that there's uncertainty about this estimate is missing the point: whether it ends up being $1.3 billion or $1.5 billion, the state is still in a world of fiscal trouble.
2) Property taxes are still very much a concern in the wake of Amendment 5's apparent demise. Cutting property taxes costs money-- and money is precisely what Florida's government is $1.4 billion short of right now.
3) Crist thinks what will get them out of their fiscal jam is the ability to draw from the state's reserves. But that's not a bottomless source of revenue either-- every time you draw down the reserves, that leaves less for dealing with the next crisis.

There is, in fact, a very good argument for requiring the projected deficit to be dealt with through the regular legislative process (which, of course, includes Crist) rather than by Crist alone. Whatever its size, there will almost certainly be a big budget deficit at the end of this year absent further action by the legislature. And the legislature has a variety of very different policy levers it can pull to fix the budget hole. It could cut spending, raise existing taxes, or even create new taxes (like, say, an income tax) that most other states already have.

These are big choices. None is obviously better than the others, and dealing with these big choices in a smart way is absolutely what lawmakers are paid for.

The governor should have input, of course, and he does. But he shouldn't be the only one tasked with solving the state's shortfall.

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