Tumbling financial markets are further clouding Gov. Rick Scott’s push for $1 billion in tax cuts as the Legislature deals with a suddenly less rosy financial outlook and less money to divvy up.
State budget forecasters this week said they expect that Florida will have nearly $400 million less for its budget than originally expected and that the “possibility of additional adverse international developments introduces a greater than normal degree of risk to this forecast.”
Key state legislators, including the chairman of the Florida Senate’s budget writing committee, said Wednesday that the financial turbulence will only make them more cautious about committing money this year, including the ambitious tax cut package Scott has sought that would mostly go towards businesses.
“This could be just a blip on the radar screen,” said Sen. Tom Lee, a Brandon Republican who chairs the Senate Appropriations Committee. “But we want to make sure we appropriate money so that we are living within our means.”
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The forecast has bigger implications than just Scott’s tax cut, Lee said. It could mean a smaller pool of money for lawmakers to spread around to deal with other priorities like the state’s prison system, mental health services and growing Medicaid costs as well. Also, with every state legislative district up on the ballot this year, lawmakers will be competing for money for a myriad of hometown projects.
“We want to do as best we can to achieve the governor’s priorities, but it’s a team sport,” Lee said.
Lee said he worries that if the financial markets don’t correct themselves, it could eventually hurt consumer confidence, which can hurt sales tax collections — the state’s dominant revenue source. He said legislators need to be cognizant of that while building the 2016-2017 budget and realize they will want to have a comfortable financial cushion. The next revenue estimating report isn’t due until August, well after the 60-day session is over and the into the next fiscal year.
Senate Majority Leader Bill Galvano issued similar concerns, saying the nearly $400 million drop in the revenue is a “big number” that won’t be easy to resolve. He said the Legislature has a good track record of cutting taxes every year and wants to do more, while staying within the confines of the state other needs.
“Certainly it will impact how we balance the tax cuts against our spending,” the Bradenton Republican said.
But Scott was defiant Wednesday night, saying he’s pressing ahead with his tax cut plan, despite the downgraded financial numbers.
“We have plenty of money to be able to do tax cuts,” Scott told the Times/Herald as he left a reception for Polk County business and community leaders in the Capitol Building. “Let’s look at history. We’ve cut taxes 50 times and look what has happened to our revenues. They’ve grown.”
The heart of Scott’s tax plan is aimed at businesses. He wants to eliminate all corporate income taxes charged to manufacturers and retail companies, permanently cut sales taxes on manufacturing equipment and gradually reduce the state’s sales taxes charged on commercial rents. Scott said those cuts will help bring new businesses to Florida, thus diversifying the state’s economy.
To win support for his tax cut plan, Scott has funded television commercials and just finished a nine-city bus tour to promote his agenda.
On Tuesday, Scott’s office released a statement on the downgraded revenue forecast that included a push for the Legislature to accept a gambling agreement that Scott signed with the Seminole Tribe of Florida in December. His office said it will produce $2.3 billion for the state over eight years.
But on Wednesday, Scott made clear in an interview that the state “absolutely” has the money to fund his proposed tax cuts even without the gambling deal. The two issues, he said, are not necessarily linked.
Earlier Wednesday Scott’s office put on a full-court press to persuade a reluctant Legislature to accept his agreement with the Seminole Tribe. Jeff Woodburn, the governor’s gaming policy director, urged the Senate Regulated Industries Committee to adopt the deal to guarantee the money over seven years.
“He is going to take the time he needs to get the best deal for the state of Florida and this is the best deal for Florida,’’ Woodburn said during a workshop on the proposal.
Key legislators are reluctant to tie the compact and the revenue estimate decline together. Galvano said he does not want to rush and get a compact done simply because of the latest revenue forecast. The significance of gambling in Florida requires a more deliberate approach, he said, which could take until 2017 to resolve.
“There is no new mandate to try to get something done to respond to the revenue estimate,” Galvano said of the compact.
Times/Herald staff writer Mary Ellen Klas contributed to this report.