TALLAHASSEE, Fla. -- Florida’s budget cutters are adhering to what’s known in management accounting circles as the “Willie Sutton rule,” named for the infamous robber once quoted as saying he targeted banks because “that’s where the money is.”
The rule holds that the greatest opportunity for cost savings can be found where the most money is spent. Sutton’s name has stuck to it although he later denied making the comment.
In Florida’s budget, most of the money is in salaries and benefits for state employees and public school teachers as well as the state-federal Medicaid health care program for low-income and disabled people.
So that’s where Republican Gov. Rick Scott and the GOP-controlled Legislature have been looking for savings in the face of a forecast shortfall of $3.6 billion or more for the budget year beginning July 1.
That gap is about 5 percent of the current $70.5 billion budget, which is propped up with nearly $3 billion in stimulus money that’ll disappear when that federal program expires next year.
Layoffs, salary reductions and employee benefit cuts are among the budget balancing proposals waiting for lawmakers when the Legislature convenes in regular session starting Tuesday.
Scott has advanced the most drastic measures. He has proposed about $5 billion in spending cuts -- including $3.3 billion for education -- and the elimination of 8,645 state jobs, or nearly 7 percent of current positions, with only about 2,000 of them vacant.
Public school officials say his proposal to slash spending by up to $703 per student, or 10 percent, would result in laying off thousands of teachers.
“I want to drive the size of state government down,” Scott says. “I want to reduce the cost of state government. I want to make sure we put money back in the hands of taxpayers so they’ll build private sector jobs.”
Scott, who made millions as a health care executive, called his $65.9 billion spending recommendation for 2011-12 a “jobs budget.”
He campaigned on a promise to create 700,000 new private sector jobs over seven years in addition to about 1 million expected as a result of the state’s economic recovery.
He wants to do that by making Florida friendlier to business through cuts in government spending, regulations and taxes even if that comes at the expense of state workers who already have gone five years without an across-the-board pay raise.
“What we’re looking at now is really trying to balance the budget on the backs of state employees,” said Senate Democratic Leader Nan Rich of Weston. “Awake the State” protests against Scott’s proposals are being organized in Tallahassee and elsewhere in Florida on the Legislature’s opening day by liberal groups such as Progress Florida and America Votes. Thousands of tea party demonstrators also are expected in Tallahassee to support Scott’s budget recommendations.
Even some Republican lawmakers have been taken aback by Scott’s recommendations, starting with a pension proposal that would effectively cut the salaries of state workers, teachers and some local government employees, including police and firefighters.
“I very much appreciate the hard work that all the folks that work for the state do,” said Senate Budget Committee Chairman JD Alexander, R-Lake Wales. “I’m not mad at ‘em, I support ‘em, and changing pay and benefit is not something I go to first.”
The governor wants public employees to pay 5 percent of their salaries into the Florida Retirement System, now entirely supported by taxpayers. He also has called for increased employee contributions to their health care coverage and cuts to some pension benefits.
“He’s doing exactly what he said he was going to do,” said House Democratic Leader Ron Saunders of Key West. “What he didn’t say was ‘I’m going to do it by taxing teachers.”’
Scott has proposed that employee pension contributions displace an equal amount of taxpayer funds that go into the retirement plan, which is one of the nation’s most financially secure. That would free those public dollars for use elsewhere such as paying for Scott’s proposed property and corporate income tax reductions or reducing his recommended budget cut for public schools.
There is support in the Legislature for employee retirement contributions but not to the extent Scott’s proposing.
The Senate’s Governmental Oversight and Accountability Committee has drafted a bill (SB 1130) that would require most public employees to contribute only 2 percent while elected officials, senior managers and those making more than $75,000 would put in 4 percent. Also, it would require those contribution only if needed to pay down an unfunded liability in the pension plan.
As of last June, the system had a $15 billion unfunded liability. That’s likely to shrink because the plan’s assets have grown dramatically as financial markets have recovered from their Great Recession swoon. Before the recession Florida had no unfunded liability.
Alexander said lawmakers may have to cut school spending but not nearly as deep as Scott’s recommendation.
“I would tell you that the majority of the Senate has serious concerns and would not want to have to go there,” Alexander said.
House Speaker Dean Cannon, R-Winter Park, and Senate President Mike Haridopolos, R-Merritt Island, have declared tax increases off the table.
Both, though, have expressed doubts as to whether the state can afford about $1.7 billion in tax and fee reductions Scott has proposed. Haridopolos later softened his stance but said lawmakers first must cut spending before they consider tax relief.
Scott’s budget director, Jerry McDaniel, a holdover from populist Republican-turned-independent Charlie Crist’s administration, has assured lawmakers Scott will be flexible and isn’t naive enough to think he’ll get everything he wants.
Scott and lawmakers are in closer agreement on Medicaid. They are anticipating savings from legislation that would expand a five-county experiment in managed care provided largely by private companies to the entire state. That plan, though, hinges on obtaining a federal Medicaid waiver. Scott also has proposed reducing fees paid to Medicare providers such as hospitals and nursing homes with the exception of doctors to save $1 billion.
Lawmakers faced similar financial dilemmas in each of the past four years but this time they cannot rely on stimulus funding or tax and fee increases that helped balance the past two budgets.
“We were hopeful that our economy would recover a bit better at this point, but it hadn’t,” Alexander said. “Medicaid growth has outpaced our estimates by billions of dollars. Our revenues are $1 billion under where we hoped they would be a year or so ago. So, all these have conspired to make for a very challenging effort.”
Associated Press writer Brendan Farrington contributed to this report.