Getting Lean in Jacksonville

Those who believe government is too big have a tendency to scoff when (as has happened since the Florida property tax cuts were ratified by voters in January) advocates forecast fiscal doom and gloom. They argue that there's fat to be cut, and that imposing big tax cuts can force government officials to make the hard decisions about unnecessary spending.

An interesting article in the Jacksonville Times-Union makes a broader case, applicable to governments, corporations and plain 0ld citizens, that sometimes we need to have a gun to our head before we do what's smart. The city of Jacksonville is replacing the least-fuel-efficient motor vehicles in its fleet with gas-sipping hybrids. The good news is that this is having a measurable impact on the city's transportation budget:

The effort is shaving $3 million from the proposed fleet management budget in a year when statewide property tax reform and a sluggish economy are expected to cramp city finances.

The bad news is that the economy is relentlessly pushing these costs up in a way that cost savings just can't cover:

While city officials say fleet cutbacks have saved $3 million, the fleet department's proposed 2008-09 budget, $48.6 million, grew by $11 million.
Skipper said a 47 percent jump in the cost of fuel was mostly to
blame, but the budget would be closer to $51.6 million without the efficiencies.

In other words, fuel prices are imposing big new costs on local governments at a time when the mandate from the state is that locals must cut costs.

One more reason why this is not the best time to be holding a gun to local governments' head and demanding more efficiency.

So should the example of Jacksonville's saved $3 million be used as ammo by anti-tax advocates looking for examples of "government waste?"

Only if they're prepared to make the same admissions themselves. Private citizens and companies nationwide are responding to high gas prices in exactly the same way the city of Jacksonville has done, by driving less and buying more fuel-efficient cars. If these folks are willing to characterize their past purchases of gas-guzzling SUV's as "wasteful," then it's acceptable to describe Jacksonville's actions in the same way. But don't expect such an admission from most Floridians anytime soon...

The Spending Cuts Continue

In the wake of a state budget agreement that imposes unprecedented cuts in state spending, there's more bad news for Florida service providers: more budget cuts. The St. Petersburg Times reports:

Gov. Charlie Crist ordered all state agencies Thursday to reduce spending by 4 percent in the coming fiscal year, just a day after signing an already pared down state budget.

The reason? A decline in projected sales tax revenues.

The Times had no trouble finding folks who are outraged by this development. Here's a sample:

"It's awful. They just can't keep doing this," said Pinellas-Pasco Public Defender Bob Dillinger. "I laid 10 people off last week and didn't fill another 10 empty spots."

Governor Charlie Crist (not surprisingly, since it was his idea) was less perturbed, arguing that the move was "prudent."

Interestingly, as the Times article notes, the move comes one day after Crist signed into law a state budget for next year in which Crist steadfastly refused to veto any substantial "wasteful" spending:

Crist's order comes just one day after signing the 2008-09 budget in which he sent no signal of his plan. In fact, he vetoed just $1-million in projects, far less than the $459-million he vetoed a year before.

The Times doesn't speculate any further about why he acted this way. But could it be that Crist's budgetary axe couldn't find any additional fat to cut, leaving just the arbitrary "across the board cut" approach available?

No Free Lunch in Pinellas County

When lawmakers were debating the merits of huge, unfunded property tax cuts last year, the big unknown was how already-strapped local governments would respond to these cuts. Panglossians sniffed that locals would "cut the fat" from their budgets, while clearer-eyed observers predicted that-- as in other states at other times-- much of the property tax loss would be made up by hiking user fees and non-property taxes.

As the St. Petersburg Times reports today, Pinellas County is starting to answer this question. Increasing fares from $1.50 to $1.75 looks to be part of the answer-- chalk one point up for the clearer-eyed observers. But the transit authority is also talking about cutting service:

At least 22 routes could be modified. In some cases, entire routes may be eliminated. Others will experience a decrease in frequency, [PSTA spokesman Bob] Lasher said.

So, chalk one up for the Panglossians-- if, that is, these were "wasteful" bus routes. But wait a minute-- is that really why they're cutting the routes?"

We want to figure out how we can affect the smallest amount of people," [Lasher] said.

In other words, they're not cutting the fat-- they're just cutting out the least vital organs.

In the end, the Panglossians probably won't even notice that the "government waste" they hoped to get rid of doesn't seem to be there to cut. After all, they're probably not depending on the bus routes that will be eliminated.

Florida Budget: $5 Billion in Cuts

State lawmakers agreed on the details of next year's budget over the weekend, and the results aren't pretty.

The big headline, that state spending is down $5 billion compared to last year, is maybe too abstract for most of us to get our heads around. When you think of it as a share of the state budget, that helps a bit: we're looking at a $65 billion budget next year, down from $70 billion for the fiscal year that's coming to a close.

Everyone involved recognizes that the cost of funding public services grows with inflation each year, so if you want the state to provide the same basket of services in 2009 that it did in 2008, the budget needs to grow (at least) with the overall rate of inflation, which was about 3% last year.

So, even if the state spent the exact same amount of money in '09 that it spent in '08, some budget cuts would be necessary. But, they fell far short of even that minimal goal. So what's getting cut?
-No raises for virtually all state employees
-No increases in per-pupil funding for education.

That's the big and obvious stuff. But a drumbeat of reporting and op-eds in recent weeks has brought home the smaller-scale, but more catastrophic cuts to safety-net programs this budget will entail. The Ledger's editorial board has a good overview of these cuts here.

"Stretching Truth" on Amendment 1?

In the St. Petersburg Times, Alex Leary draws attention to "truth-stretching" in the Florida property tax debate.

Leary argues that proponents of Amendment 1 are suggesting, falsely, that homeowners will see bigger tax cuts than many are likely to. In fairness, this isn't the simplest thing to characterize: there are two kinds of property tax cut involved in Amendment 1. Homeowners who aren't going anywhere will receive a larger homestead exemption, with an annual tax cut averaging $240. But homeowners who do sell their homes (as long as their next home is in Florida) will see a larger benefit, as they'll get to keep the tax break they gradually accumulated due to the "Save our Homes" assessed value cap. So it's hard to characterize the "average tax cut" in a soundbite.

But even this nuanced explanation of the expected tax cut omits the troubling fact that the huge cost of the resulting homeowner tax breaks-- call it Save Our Homes on Steroids-- would force local governments to jack up property tax rates on the remaining base-- including what's left of the homeowner tax base. And the indirect cost to the public in terms of reduced quality public services won't be known until it's too late.

Because the Florida legislature punted on its chance to enact true tax reform by creating a "circuit breaker" credit that ties property taxes to ability to pay, there's no point in wishing that the current debate would focus less on how big everyone's tax cut is, and more on why this particular type of tax cut is the right move (which it's not).

But I'll go ahead and wish that anyway.

Police Chiefs Oppose Amendment One

The Sun-Sentinel reports that the Florida Police Chiefs Association is the latest group to weigh in against Amendment 1, the ballot measure that would double Florida's property tax homestead exemption. The (sensible) reason: they're afraid the resulting hit to local governments would endanger funding for basic police functions.

For that matter, the Association thinks these functions are already in danger:

[Juno Beach Police Chief H.C. "Skip"] Clark said police departments across the state have already had to make budget cuts as the result of the Legislature's mandate last year that cities roll back taxes. Some departments have frozen open positions, eliminated officers at elementary schools and consolidated services.

As they have throughout the fall, proponents of Amendment One are poo-pooing this idea:

"You're telling me the first thing they're going to cut is police and fire? I find that intellectually dishonest ... not being forthright with voters," said Senate Finance and Tax Chairman Mike Haridopolos, R-Indiatlantic.If faced with less revenue, Haridopolos said, city officials will have to prioritize their spending and "the basic responsibility of local government is police, fire and roads."

In other words, police groups should stop worrying, because the cuts will come from other areas first. This is a dispiritingly narrow way of defending this tax cut: Haridoupolos is basically saying "why should you oppose something that doesn't hurt you?" Leaving aside the problem that police groups are saying their budgets have, in fact, been hurt already, that's not the way policy decisions should be made. It's not about whether you personally win or lose-- it's about whether the proposed change is the right thing to do.

Anyway, chalk up one more statement of opposition to the amendment...

"A Hard Place to Be Poor:" Is Florida Losing Its Sparkle?

Folks with an axe to grind sometimes assert that population growth in certain states (and declines in other states) can be explained by characteristics of state tax systems, and occasionally engage in slipshod efforts to quantify these impacts. This is an easy thing to do poorly, and a hard thing to do correctly: after all, if you want to measure the impact of a tax system on a state's attractiveness to potential residents, it's not enough to simply look at tax rates-- you also have to look at what the state is doing with its tax dollars. Anyone with a school-age child recognizes the importance of quality public schools in making your living decisions.

So, this is a pretty hard thing to measure. But sometimes you can, in fact, look at specific features of a state tax system and say pretty unequivocally that, in fact, this feature makes people less likely to move there.

And, according to the St. Petersburg Times, that's exactly what Florida's property tax system currently does. The "Save our Homes" tax break, which forces first-time homebuyers to pay much higher property taxes, other things equal, than long-time state residents must pay, represents a real barrier against young families seeking to buy their first home in Florida.

This doesn't mean that "Save our Homes" is responsible for the state's slow(er) population growth-- after all, even if it makes the state less attractive for new residents, it makes Florida more attractive for folks who are already there-- and the Times laudably refrains from blaming the property tax system directly for this result. But it's worth reflecting on this question: does Florida really want a tax system that falls most heavily on the young first-time homebuyers who can be the long-term bedrock of the state's population growth?
Because that's what they've got with "Save Our Homes", to say nothing of the state's high reliance on regressive sales taxes.

Check out the complete Census population data here.

St.Petersburg Times Ed Board: No on Property Tax Ballot Proposal

With the Florida public (or at least the small fraction of the Florida public that can be convinced to vote on a non-Presidential ballot) poised to pass judgment on a property tax cut proposal referred by the state legislature in less than a month, the St. Petersburg Times editorial board rings in the new year by letting us know where they stand on this proposal.

They're agin it:

This state and its residents are facing serious economic challenges in 2008, but the amendment on the Jan. 29 ballot is not the answer.

And their reasons for opposing it seem exactly right:

There are many good reasons to vote against the property tax amendment. It
provides little help to businesses and owners of second homes or investment properties who need the most relief. Instead of creating a fairer property tax system it adds to the unfairness by allowing Save Our Homes benefits to be taken to a new home. And even with its projected reduced savings, the amendment still would cut funding for education and local government exactly as their revenues will be dropping because of other tax reforms and the slumping economy.

Put another way, fairness and sustainability are two areas in which the Florida tax system could use some improvement-- and the January proposal would not help in either area.

The striking thing about the debate over Florida property tax reform so far has been the absence of any real concern about fairness. Some participants in this debate would probably take issue with this characterization, but these are the same folks who thinks that the central tax fairness question to be answered in the next month is "do I deserve a $240 tax cut?" And that having answered "hell yes," they've successfully addressed whatever tax fairness concerns might arise.

The broader tax fairness question that should be asked, and answered, over the next month, is "what's wrong with Florida's property tax system, and does the proposal to be voted on fix these problems?"

The folks at the St. Pete Times clearly get this. It remains to be seen whether Florida voters will.

Donald Trump On Board with Crist's Tax Plan

With a month and a half left before Florida voters pass judgment on the Florida legislature's proposed property tax cut in January, folks are choosing up sides. And New York gazillionaire Donald Trump is on the side of the tax cutters.

Turns out Trump is paying $1 million in property tax on one Florida house-- which sounds pretty shocking until you know that the house is worth $56 million.

Left unexamined by the article is whether a $1 million property tax bill is anything disproportionate for such a house. $1 million is about 1.8% of the value of Trump's home-- certainly on the high side by comparison to other states, but not outlandishly so. And, of course, by Florida standards, Trump is being treated exactly the same, for property tax purposes, as a fixed-income retiree with a tiny vacation shack miles away from the beach. In other words, if you think about the fairness of Trump's tax situation by comparison to that of other vacation homeowners in Florida, he's got nothing to complain about.

It's certainly true that broad classes of people have gotten screwed by the Florida property tax system, and vacation homeowners are definitely among them.

But one thing Trump might consider is that if Florida policymakers continue to enact unaffordable property tax cuts, pressure will build in the long run for a new source of state funding for needed public services: and the obvious choice for Florida would be a personal income tax. And while the vast majority of Floridians would be better off if the state traded in its property tax-sales tax mix for a personal income tax, Trump would be one of the relatively small number of wealthy folks who would be unambiguously worse off.

Tax Commission: Let's Tax Services. No, Really.

The Florida Taxation and Budget Reform Commission, which meets once a generation (true) to recommend structural changes to Florida's tax system, has come up with a good one: expanding the sales tax base to include more services.

This very sensible idea has an unfortunate history of inducing groans wherever it's brought up; just ask lawmakers right now in Maryland or Michigan.

But that doesn't mean it's a bad idea: it's not. It just means that implementing a sales tax on services would require taking unwarranted tax breaks away from very specific groups who would like to keep them, thank you very much, and who tend to have lobbyists on call 24-7 ready to defend these tax breaks. And that's a tall order.

Florida lawmakers probably know this better than anyone, since they were among the first (and only) states to pass (and quickly repeal) something approaching a comprehensive sales tax on services, back in the late 1980s. But at least one member of the commission who remembers those days, Martha Barnett, thinks the bitter experience from the last go-round should be used to help push through this always-good idea now. The problem last time, she thinks, was that lawmakers rushed the process:

"We tried to do too much too fast with too little information," she said.

Lawmakers in Maryland and Michigan would probably nod their heads in agreement on that one, as well.

It's easy, of course, for an unelected body such as the Commission to propose something as politically volatile as a services tax. And if lawmakers act on the Commission's recommendation, they can count on a lot of political opposition.

But it's still the right thing to do. Check out Fair Tax Florida's policy brief on taxing services for more information.

Rubio on User Fees

Today's excellent Daytona News-Journal editorial on the likely user fee explosion that would result from passing the legislature's January property tax ballot measure, which we've already commented on today, includes an interesting rationalization from House Speaker Marcio Rubio. Here's Rubio explaining why it would be OK if locals made up for unaffordable property tax cuts by hiking a variety of user fees:

The West Miami Republican told the South Florida Sun-Sentinel newspaper that such fees are fair. "Fees are clear; they're not hidden," he said. "If you don't like that city and county officials are raising them, you can vote them out of
office on Election Day."

But exactly the same thing can be said of local property taxes. And in fact, the transparency and accountability of property taxes is what makes so many advocates of local control very protective about this revenue source.

This isn't to say, of course, that Florida's property taxes are currently all that transparent--they're not. They're unfair and unpredictable, imposing unjustifiable tax penalties on first-time homebuyers and rewarding people for nothing more exceptional than staying in the same home for a long time. But these flaws can be remedied quite easily if lawmakers are willing to renounce the "Save Our Homes" tax break that makes it all go wrong.

Moreover, user fees are actually fairly sneaky, in the same way that the sales tax is sneaky: it nickel-and-dimes you in a way that makes it hard to gauge the overall annual impact on your pocket book. In other words, you can make a pretty good case that user fees are actually less transparent than the property taxes Rubio wants to get rid of.

Tax Cuts= User Fees?

The editorial board at the Daytona Beach News-Journal casts their vote on the January property tax referendum in today's edition:

The bottom line: The proposed ballot issue exacerbates problems caused by the escalating costs of providing basic services. Voting "no" in January is the right choice to avoid large increases in local government fees.

In other words, the folks at the News-Journal aren't buying the argument that local governments can afford the additional property tax cuts the January vote might force them to make.

This is speculative, of course, and the reaction will almost certainly from one locality to the next. But, given that locals have already been forced to pare back their property taxes this year, it's not hard to believe that stacking on even more cuts would force many local governments to make some unappetizing choices: cut services or replace the lost revenue somehow?

The News-Journal editorial cites anecdotal evidence that suggests a lot of governments are already finding there's no fat to trim off their budgetary bones:

Port Orange, DeLand, Ormond Beach, Daytona Beach and Edgewater are looking at a fire-services fee, to cover expenditures that traditionally have been paid with general property taxes. DeLand and Port Orange are also looking at charging for some medical rescue services.
These Volusia County cities are far from alone. Elsewhere, cities are considering new fees or increases for water, sewer use, stormwater drainage, garbage pickup, development impacts, building permits, burial plots, library use, park and pool use -- and more.

As the editorial points out, this should hardly be a surprise. Anyone who remembers the dual legacy of California's Proposition 13-- lousy schools and a sudden growth in creative local user fees--could have told you this is a plausible outcome whenever state lawmakers make it harder for locals to rely on property taxes.

Again, this is all hypothetical. Some locals will find room to cut; others will find that they'd rather look under the cushions for the proverbial loose change rather than imposing further damaging cuts on vital services. But the fundamental point the News-Journal makes is dead on: a shift towards user fees is a poorly-thought-out, downright sneaky way of paying for property tax cuts. So why enact them?

Violating the "Right to Travel?"

It's never easy to design an effective ballot proposal on tax issues. You've got to explain inherently complicated tax concepts in simple, easy-to-understand language, and you've got to do it in a way that doesn't misrepresent the proposal's actual impact.

In their effort to achieve these goals, the legislative architects of Florida's January 2008 ballot measure on property tax cuts may have forgotten a third important goal: don't violate the US Constitution.

As the Palm Beach Post describes it, the hallowed (since 1999, anyway) principle at issue here is "the right to travel:"

The "right to travel," established by a 1999 Supreme Court decision, gives Americans the right to move from one state to another without being treated less favorably than those who established a home earlier.

The January ballot measure falls afoul of this provision by treating current Florida homeowners much better than, say, someone who currently owns a home in Alabama. Under the legislature's latest plan, a Florida homeowner who is currently getting, say, a $50,000 reduction in his home's value from the "Save our Homes" assessed value cap would be allowed to transfer this tax break to a new (Florida) house when he moves. Someone moving from Alabama would get nothing, and would pay much higher property taxes on the very same home than would the Floridian.

Even if it wasn't unconstitutional, this would be patently unfair. It's hard to defend a tax break that's based not on your ability to pay but on your bona fides as a long-term resident. But now Florida lawmakers have to worry about whether their latest property tax bill violates the highest law in the land.

The fundamental miscalculation lawmakers are making here is that, faced with an unfair tax break that gives too much to some and not enough to others, they've decided the only way to fix it is to give more to everyone. If the US constitutional problem turns out to be legit, "everyone" just expanded to include folks who don't currently live in Florida.

When you're in a hole, the old saying goes, stop digging. Florida lawmakers are in a tax policy hole of their own making, and appear to think they can dig their way out. But a more sensible first step would be to repeal "Save our Homes" and enact property tax breaks targeted to those most in need.

Keeping an Unfair System Unfair

The Sun-Sentinel's Michael Mayo gives a dispiriting (but probably quite accurate) assessment of Florida's property tax mess in a Sunday column.

True tax reform, and an overall fair and reasonable tax system in Florida, have about as much likelihood of happening as Fidel Castro getting a ticker-tape parade down Calle Ocho.

Mayo's pessimistic assessment is driven by the revised ballot measure referred to voters by the state legislature last month. Since the passage of a property assessment cap known as "Save Our Homes" almost 15 years ago, Florida law has allowed owner-occupied homeowners a tax break that gives the biggest tax breaks to (a) people whose homes are worth the most and (b) people who have owned the same home for the longest time. Who pays for this tax break? In Mayo's words:

Everyone Else (businesses, landlords, recent and first-time buyers, snowbirds).

From a policy perspective, the obvious solution is to repeal "Save our Homes" and enact targeted property tax breaks that are actually geared toward the homeowners, renters and businesses who need it most.

The second most obvious solution is to take Florida out of the diminishing "no income tax" club, enacting a personal income tax to reduce the upwards pressure on state sales taxes and local property taxes.

Both approaches are sound-- but neither is obviously a political winner in the short run. In the spirit of our federal fiscal policies this decade, Florida lawmakers clearly believe that short-term realities require "no losers"-- that is, tax reform shouldn't make anyone worse off.

This is absurd, of course. When you have a group that's received wildly too-generous tax breaks (long-time homeowners) and groups that have been completely hosed (renters, businesses, first-time homebuyers), true reform needs to gore a few oxen. And Florida lawmakers have steadfastly refused to do so.

What's it gonna take to change this depressing trend? Mayo thinks it'll take "voters going against their self-interest and politicians actually leading." He's only half-right on this score-- while it would clearly require lawmakers to show a little backbone, any shift from regressive property and sales taxes towards a progressive income tax will almost certainly make a majority of Florida's voting age population better off. A better way of phrasing it is that voters would need to see through anti-tax rhetoric and recognize where their self-interest lies-- also no easy trick.

Handicapping the January Ballot Proposal

In the wake of the Florida legislature's latest property tax plan-- which voters will pass judgment on in January of 2008-- the handicapping has begun. Will the legislature's proposal garner enough support to pass the 60-percent threshold needed? The Palm Beach Post's Michael Bender gives an initial survey that suggests it's got a chance, both because special-interest money might get plowed into the effort, and because bills referred by the legislature have a pretty good track record with Florida voters. Bender also points out reasons why it may yet fall to pieces: it's quite possibly unconstitutional, and special-interest money may yet emerge to oppose it.

One interesting reason for the bill's possible passage is mostly implied, however: no one's ox gets gored, at least not obviously. And herein lies the true problem with the legislature's proposal.

One Republican lawmaker, Ellyn Bogdanoff, asks "What would you gain by voting against it?" And this seems initially to be a pretty sensible question. After all, in the short run, if this thing passes you're either better off or unaffected, in terms of your current property tax bill.

But the question (and the lawmaker's answer, "I don't know that we gain anything," demonstrates the legislature's biggest failing in this process-- its unwillingness to think about the long-term impact of its actions.

The long-run implications are very different from the short term, "no losers" view of this proposal. It's incontestably true that the legislature's latest brainstorm preserves some unwarranted tax breaks (by making the "Save our Homes" tax break portable), gives too-small tax breaks to some groups that deserve them (businesses) and entirely ignores other groups that deserve them (first-time homebuyers). In the long run, the well-founded complaints of these shortchanged groups will leave Florida's tax system just as unpopular, unfair and unbalanced as lawmakers found it last month. But nobody actually loses right now from this plan, which leads to Bogdanoff's question.

Truly forward-thinking lawmakers would ask whether this bill is the right approach for a sustainable, fair and (gasp!) popular tax system. An even marginally-forward-thinking legislature would ask whether the long-term impact of the plan would be better than doing nothing. But Florida's legislative leaders aren't asking even that. They're simply banking that by providing tax cuts for some and tax hikes for no one, they've come up with a solution a majority of Floridians can agree on. And that's a shame.

Mayor Files Suit to Prevent January Tax Vote

If one Broward County mayor has his way, the referendum scheduled for next January, in which Floridians will decide whether to create a new "super exemption" from homestead property taxes, will never see the light of day. The Miami Herald reports that Westin Mayor Eric Hersh has filed a suit with the State Supreme Court arguing that the proposed super exemption referendum is unconstitutional. The Herald describes three prongs in Hersh's legal argument:

• Misleads voters by failing to tell them that a vote for the amendment is a vote to phase out and ultimately replace Save Our Homes, which now caps taxable assessment increases on primary homes at 3 percent a year.
• Violates the constitutional requirement that a proposal with more than one change to the constitution be voted on only during a general election, not a special election.
• Interferes with the constitutional powers of local governments to increase property taxes because the Legislature allows local governments to make budget cuts in 2007 before the amendment would take effect.

The first two points, at least, are pretty common arguments. Many states have a "single subject" requirement for constitutional amendments, and courts routinely shoot down proposed ballot initiatives because the language is misleading or incomplete.

Whether any of these charges hold water will be up to the courts. But these are all legitimate questions to ask. And the larger question lurking behind it all is: is a vote of the people the best way to decide what's good property tax reform?

Environmental Cost of Property Tax Cuts?

In the wake of a June special session of the state legislature that imposed major property tax cuts on Florida local governments, the drumboat of endangered local government services continues. The Orlando Sentinel documents the potential impact of these cuts on efforts to preserve Florida's delicate ecosystem:

State property-tax changes could put a financial pinch on some of the area's biggest environmental efforts.The Lake County Water Authority has planned for years to start two projects aimed at cleaning up the Harris Chain of Lakes. A $15 million proposal would remove a delta of sand and organic materials from Lake Beauclair -- a massive mound of deposits caused by years of polluted water coming downstream from Lake Apopka.Another project would divert water from Apopka-Beauclair Canal and clean up pollutants before the water reaches Lake Beauclair and the rest of the Harris chain. That could cost more than $7 million to build and up to $1.2 million each year to operate. The Water Authority has saved millions to help pay for some of the work. But the agency still needs future funding for these and other proposals.

Does this mean these projects will be hamstrung, or even cancelled outright, as a result of the pending property tax cuts? It's clearly too soon to tell. But the folks who are making the planning decisions on these important projects are obviously nervous about the impact Florida property tax cuts could have on their ability to fund these services-- and this nervousness is affecting their decision-making process:

The financial uncertainty may impact how the Water Authority moves ahead with its huge projects."With us needing more and fearing a cut in property taxes, we're like most everybody else -- we don't know what will happen," said Water Authority board member Nancy Fullerton.

For Floridians who are desperate to understand whether the property tax proposal they'll vote on in January is going to be affordable or not, it's of the highest importance to know whether the Water Authority boards and their ilk are crying wolf, or whether the pending cuts would eviscerate important local efforts at environmental conservation. Neither the Sentinel's article, nor this blog post, can pretend to answer this question. But this uncertainty is a direct consequence of the way Florida lawmakers decided to cut taxes this year. If they'd cut state taxes, they could have simultaneously identified cuts on the spending side that would make these tax cuts affordable, and brought things into balance. But because they chose to cut local taxes, Florida lawmakers didn't have to worry about enacting these cuts at a level that would be affordable. They could enact big cuts, and let locals figure out how (if at all) they could pay for them.

When the state mandates local tax cuts, but doesn't provide the financial support needed to ensure that these cuts will be affordable, that's a recipe for fiscal uncertainty at the very least-- and, in the worst case, fiscal disaster.

Proposition 13 Redux?

Survivors of California's "Proposition 13" tax revolt know that good intentions can go bad pretty fast. In particular, the lesson Californians have learned is that when you force unaffordable local property tax cuts, locals usually can't just reduce their total revenues by the full amount of the cut. Some of the property tax cut will have to be made up through hikes in other taxes or fees. And the most likely outcome is that the revenue will be made up in a way that's less visible- instead of one big tax, a lot of little nickel-and-dime stuff.

There's evidence emerging already that this is exactly what's going on in Florida, as local governments deal with the state-mandated property tax cut passed in a June 2007 special session. Florida Today has the story:

Facing a property tax shortfall of $4.1 million, city leaders may start enacting a minor tax on residents for drinking water,taking showers and filling swimming pools.
After more than an hour of debate recently, the Melbourne City Council decided to pursue a new 10 percent utility tax on water sales.

This is nothing new in Florida, of course. Local government collections from utility taxes on electricity, water and other utilities are estimated at about $1 billion for fiscal year 2007. Even in Florida, that's some serious money.

The question is, how can this tax swap be justified on fairness grounds? Lawmakers have demonstrated an (arguably sensible) aversion to taxing what they consider "necessities" such as food and utilities. The city of Melbourne is about to take exactly the opposite step, taking a path that many other Florida municipalities have already followed.

Of course, a tax on water consumption will hit businesses too. But that was also true of the property taxes the city will no longer be able to collect this year as a result of the state's actions in June. So this can't really be justified as an effort to make businesses pay more-- not that any city council member in Melbourne would have said so anyway.

The truth is most likely that Melbourne is taxing water because it's the tool that is available to them. They're doing it because the alternative is painful cuts in the services the city provides to its constituents.

This may be smart politics, at least for state lawmakers. But it's dumb policy-- and it's a policy that will inevitably make Florida's tax system even more unfair.

WSJ Weighs In on Florida's Property Tax Debacle

As a state lawmaker, you know you've made the big time when the Wall Street Journal's editorial board singles your tax ideas out for attention. A June 30 WSJ editorial (sorry, no link for nonsubscribers) takes note of Florida's property tax situation:

Florida family incomes have risen by a healthy 37% since 2001, but average property tax bills have climbed by 83%. In some communities, such as Boynton Beach, average property tax bills have tripled in seven years. Politicians tell of town hall meetings where angry constituents announce they are literally being taxed out of their homes.

The Journal notes approvingly that lawmakers have voted to cut property taxes-- but sees a danger ahead:

The catch is that this must be approved by 60% of the voters in a January 2008 ballot referendum. And already the liberal interests that feast on local spending -- government employee unions, contractors and local politicians -- are predicting Armageddon for schools and city services if the tax cuts are enacted.
House Speaker Marco Rubio, who has led the charge for property tax relief, says local governments have already spent $24 million of taxpayer money to lobby against the initiative.
With many municipal budgets having doubled in size over the past eight years, many Floridians are unimpressed with these sudden exclamations of empty city wallets. Taxpayer groups point to numerous examples of flush spending by cities and counties in recent years, including $32 million for a new municipal golf course in Palm Beach -- a county that already has 160 courses.

So, the Journal's story is basically the same as Rubio's: local governments are crying wolf. They've made out like bandits over this decade, and are terrified that the fat times will end. But in the end (the Journal's narrative goes), they'll be able to trim the fat in a way that makes these tax cuts eminently unaffordable.

The missing link here, of course, is a sense of what's happening to state tax collections--and state aid to local governments. The narrative the other side is telling is that the state has enacted a raft of unaffordable tax cuts over the past decade, and has paid for them by cutting state aid to locals--which has inevitably meant that locals must hike their property taxes just to pay for basic services. Is the other side correct? Maybe-- I haven't seen a compelling statistical argument on this front, but that doesn't mean it's not out there. But the WSJ is following the Rubio party line by pretending that cuts in state aid aren't even part of the story.

Amidst Property Tax Debate, Legalized Gambling Inches Forward

For most of the past decade, advocates of legalized gambling have found a staunch opponent in Florida in Governor Jeb Bush. But with Bush out of office, new Governor Charlie Crist isn't taking quite as hard a line-- and the floodgates are slowly opening. As the Tampa Tribune documents, legislation passed in this year's session allows "more slot machines, bigger poker pots and longer hours of operation."

One of the principal architects of gambling's expansion in Florida is Rep. Jack Seiler, a Democrat from Wilton Manors, who successfully sponsored a bill to increase the number of slot machines allowed at parimutuel facilities from 1,500 to 2,000. Seiler's reasoning: it's gonna happen anyway, we might as well take advantage of it:

"Gambling is here in Florida," Seiler said. "It is not going away. And if it's going to be here, we might as well get some of the benefits."

This argument holds true up to a point: humans have always gambled, and probably always will, so the question is whether this baseline level of gambling will happen in an unregulated environment or a regulated one. But when gambling is expanded as a response to a fiscal crunch, the rationale subtly changes. Whether they realize it or not, Seiler and other gambling proponents are now counting on gamblers to help fund schools-- and have every reason to encourage them to keep on gambling. Tom Talley of the Florida Council on Problem Gambling says it better than I ever could:

"Once they get in these places, they just keep digging the needle in deeper...They increase the games, they increase the amount of betting."