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Outline Examples of Budget Options Available to Protect People From Devastating Cuts

November 30, 2001

Senate Democratic Leader Tom Rossin and House Democratic Leader Lois Frankel unveiled a menu of options to address the state's $1.3 billion budget shortfall that would ensure that Florida's budget is not balanced on the backs of the state's public schools, lifeline health care services for children, seniors and other vulnerable citizens and public safety. The Democratic Leaders said that these options are just examples of many available options that their colleagues should seriously consider to address the revenue shortfall while protecting public schools and health care services for vulnerable citizens and public safety from falling victim to budget cuts.  

"We should not use terrorism as an excuse to shortchange the educational future of our children when there are reasonable alternatives to making these budget cuts, " said House Democratic Leader Lois Frankel, of West Palm Beach. "The eventual strength of Florida's economy will rest on a well-educated workforce that will enable Florida to diversify and stabilize our marketplace."

"The good news for Florida is that even though Governor Bush has turned record surpluses into a huge deficit, we can still get our economy back on course without cutting critical services or public education. Not only can we fix our budget without these devastating cuts, we can provide a tax break for all Floridians that will truly stimulate the economy," said Senate Democratic Leader Tom Rossin, of West Palm Beach. "Looking at options besides cutting services would provide a shot in the arm now, but more importantly would build the foundation for a healthy economy for years to come."

The Democratic Leaders pointed to the recent Cornerstone Report from the Florida Chamber of Commerce Foundation (http://www.newcornerstoneonline.com/body_news.html) as evidence that the state "cannot afford to take a step backwards by cutting education and lifeline services for the state's vulnerable."  According to the Cornerstone Report, in the area of education, data from the National Center for Education Statistics shows the state's K-12 expenditures per pupil ranked 38th in the nation in 2000, compared to 21st ten years ago - with a decline in real dollar spending since the early 1990s from $6,200 to $5,875 per pupil.

The Cornerstone Report also says "Florida's existing effort in education and research may not be sufficient to position the state to compete in the knowledge economy."

The report shows that access to high-quality jobs remains a problem in Florida with 19 percent of working parents in the state identified as "working poor" with incomes that fall at or below 150 percent of the poverty line. The report also shows that during a decade of "unparalleled economic growth" nearly 14 percent of Floridians live in households with incomes below the poverty line. The report adds that the "differences in economic opportunity among socioeconomic groups are the product of fundamental differences in educational attainment and labor skills."

The Democratic Leaders said the data in the Cornerstone Report provides strong proof why the state must explore every available option to protect Florida's public schools and services for vulnerable citizens from budget cuts.

The menu of budget options outlined by the Democratic Leaders lists a combination of spending cuts and tax reforms including: 

Intangibles Tax

Option A: Close the Florida Intangibles Tax Exempt (FLITE) Trust loophole that allows persons with more than $2 million in taxable assets to avoid paying the tax while allowing the scheduled exemptions to become effective on January 1, 2002. Estimated revenue generated - $300 million in FY 2001-02, $300 million annualized.

Option B: Move 600,000 taxpayers off the tax rolls by allowing intangibles tax exemptions of $250,000 for individuals and businesses and $500,000 for couples to take effect January 1, 2002 and rolling back the intangibles tax rate to 2 mills on taxable holdings above those thresholds. Under Florida law, Individual Retirement Accounts, 401Ks, deferred compensation plans, pension plans, savings accounts, certificates of deposit and government bonds and notes are among the items not subject to Florida's intangibles tax. Estimated revenue generated - $600 million in FY 2001-02.

How Option B would affect those who pay Florida's intangibles tax:

Filing Status                 Taxable Holdings                         Current Tax                    Option B              Change

Individual                              $250,000                                        $230                            $0                      -$230

Individual                              $400,000                                        $380                            $300                  -$80

Individual                              $500,000                                        $480                            $500                  +$20

Individual                              $1,000,000                                     $980                            $1500                +$520

Couple                                  $500,000                                        $460                            $0                      -$460

Couple                                  $800,000                                        $760                            $600                   -$160

Couple                                  $1,000,000                                     $960                             $1000                +$40

Couple                                  $1,500,000                                     $1460                           $2000                +$540

Business                                $200,000                                        $200                             $ 0                      -$200  

Business                                $350,000                                        $350                             $200                   -$150

Business                                $500,000                                         $500                            $500                     $0

Business                                $1,000,000                                      $1000                          $1500                 +$500


Under Option B, an individual with $250,000 in taxable holdings would no longer pay Florida's intangibles tax and would receive $230 in tax relief over current law while an individual with $500,000 in taxable holdings would pay an additional $20 in the intangibles tax over current law. A couple with $500,000 in taxable holdings would receive $460 in tax relief over current law while a couple with $1,000,000 in taxable holdings would pay an additional $40 over current law. A business with $200,000 in taxable holdings would receive $200 in tax relief over current law while a business with $1,000,000 in taxable holdings would pay an additional $500.

Please note, under Option B, business accounts receivable would remain exempt and no taxpayer would pay a higher rate than they would have paid under the law in place in 1998.

Option C: Repeal or defer the increased intangibles tax thresholds that are scheduled to go into effect on January 1, 2002. This would affect more than 600,000 taxpayers and generate an estimated $128 million in FY 2001-02, $159 million annualized.

Overweight Motor Carrier Fines and Permits

Adopt Florida TaxWatch and the Legislature's Office of Program Policy Analysis and Government Accountability (OPPAGA) recommendations to enforce truck weight regulations. Estimated revenue generated - $28 million for FY 2001-02, $56 million annualized.

Irresponsible Driver Surcharge

Adopt Florida TaxWatch recommendation to institute a program where drivers who have committed serious violations must pay a surcharge to renew their license. This roadway safety measure has already been implemented in New Jersey and has led to a decrease in the number of violations over the last four years. Estimated revenue generated - $50 million in FY 2001-02, $100 million annualized.

Corporate Tax Credit for Private School Vouchers

Delay legislation passed during the 2001 regular session that provides businesses with tax credits for donations to private school voucher programs. Estimated revenue generated - $50 million in FY 2001-02, $50 million annualized.

Alcohol Surcharge

Roll back Florida's alcoholic drink tax to the rate in place in 1999. Estimated revenue generated - $40 million in FY 2001-02, $80 million annualized.

Tax Reform

Pass legislation to immediately repeal tax exemptions for skyboxes, sports teams, Golf Hall of Fame, charter boat leases and contact lens molds in excess of $100,000. Eliminating these exemptions would generate an estimated $27 million in FY 2001-02, $54 million annualized.

Sunset and commit to justifying the need to re-enact the bulk of the $22 billion in existing sales tax exemptions (except for necessities like food and medicine). The exemptions would be reviewed over the next two regular sessions with the goal of lowering the sales tax rate to five cents or lower. This action would lower the sales tax rate for all Floridians while increasing the stability of Florida's tax base and stimulating economic growth.

Borrow from the Budget Stabilization Fund

Consider borrowing some of the $941 million in Florida's Budget Stabilization Fund to help balance the state's budget with a plan to pay it back, as required by law. When the economy improves, the Budget Stabilization Fund should be fully funded at 10 percent of the prior year's general revenue (it is now at 5 percent).

Reduce State Agency Expense Budgets

Explore recommendation by Florida TaxWatch to reduce administrative costs by 10 percent and motivate state agencies to increase their use of technology, teleconferencing, e-mail in lieu of travel, remote classroom training and postage. Estimated savings - $68 million in FY 2001-02, $136 million annualized.

Renegotiate State Contracts

Open up existing state contracts to review and renegotiation with a goal of generating $75 million during FY 2001-02 and $300 million annualized.

Return to Competitive Bidding

Repeal changes recently made to Florida statutes that lets agencies more easily avoid competitive bidding and provide the Comptroller with authority to review any contract over a threshold amount (e.g. $1,000,000) to determine whether citizens have been well served.

Eliminate Unspent 2001-02 Member Projects

Eliminate from the current year budget any member project of less than statewide implication (that benefit a local area only) that has not yet been funded. Florida Tax Watch identified $282 million of these projects in its 2001 Turkey Watch report ($179 million of which were vetoed by the governor). Enact a moratorium on member projects for FY 2002-03. Estimated savings - $50 million in FY 2001-02, $300 million in FY 2002-03.

First District Court of Appeal Annex

The 2000 Legislature appropriated $15.8 million to build 6 new courtrooms in the First District Court of Appeals. This project did not go through the Capital Improvement Project process and was therefore included in the Florida Tax Watch 2000 Turkey Report. The First District Court of Appeals does not support this project. Estimated savings - $15.8 million in FY 2001-02.

**NOTE: Frankel and Rossin Availability for Comment: House Democratic Leader Lois Frankel will have a conference call with reporters and editorial writers on Tuesday, November 20 at 10:30 a.m. to discuss Florida's budget shortfall and the options available to help balance Florida's budget. Interested media are invited to participate by calling (850) 921-6623.

Senate Democratic Leader Tom Rossin will be available on Tuesday, November 20 from 2 p.m. until 3 p.m. in his district office at (561) 790-4717 to discuss Florida's budget shortfall and the options available to help balance Florida's budget.