EUSTIS, Florida (Reuters) - Florida’s Tea Party-backed Governor Rick Scott proposed cutting more than $5 billion from state spending on Monday while also slashing taxes as he laid out his first budget proposal aimed at closing a deficit of nearly $4 billion.
The Republican, a former healthcare executive, proposed saving nearly $4 billion over two years by reforming Medicaid, the health insurance program for poor people.
He also saw savings of $2.8 billion over two years through an overhaul of Florida’s relatively healthy state pension system. Scott also proposed cutting taxes by more than $4 billion over two years. This would include a roll-back of corporate income taxes from 5 percent to 3.5 percent and reductions in property taxes.
Critics of the budget plan from Scott, who was elected in November on a pledge to create 700,000 jobs in seven years, said it would cut nearly 9,000 positions from state payrolls and slash billions of dollars from spending on education.
“This budget from the governor is a frontal assault on the quality of life of every Floridian and will not create a single job nor spur our economy forward; instead it takes us further into the economic ditch,” Florida Democratic Party Chairman Rod Smith said in a statement.
But Florida is not alone in contemplating large spending cuts to offset revenues only slowly recovering from recession and the winding down of $150 billion of federal assistance to states from 2009’s economic stimulus program.
According to the Center on Budget and Policy Priorities think tank, nearly all states are considering spending less in fiscal 2012 than they did in 2008. That was the last year before recession devastated revenues.
Not only have states not returned to their pre-recession fiscal health, but total proposed spending for fiscal 2012 could be more than 10 percent below 2008 inflation-adjusted levels, the CBPP said in a report last week.
Twenty-four states project lower revenues in fiscal 2012 than they had in fiscal 2008, according to CBPP data.
Governors and other leaders in New York, California, Texas and other states are eyeing deep cuts in spending in education and healthcare and very few, if any, increases in taxes as ways to balance budgets.
The finances of Florida, the fourth-largest U.S. state, are less distressed than many others faced with fiscal crises that roiled the traditionally stable U.S. municipal bond market. But Florida is an epicenter of the continuing U.S. mortgage crisis and it is struggling with record high unemployment, as it seeks to trim budget gaps amid dwindling revenues.
Seeking to remain true to the Tea Party movement that advocates smaller government, Scott unveiled his budget to about 1,000 Tea Party activists in Eustis, about 200 miles outside the state capital, Tallahassee, where the state legislature will have to approve his proposed budget.
The event took on a carnival atmosphere as hawkers sold T-shirts, buttons and hats with themes such as “Don’t Tread on Me” and “Friends Don’t Let Friends Vote Democrat.”
Scott said he can squeeze $600 million from reviewing and renegotiating contracts while trimming $400 million by shifting more Medicaid patients to managed care and $500 million by making changes to juvenile justice and state prison programs.
Scott’s budget proposal has Florida spending just under $66 billion in fiscal 2012 starting July 1 and $63.3 billion in fiscal 2013. The current fiscal 2011 budget totals $70 billion, including about $23 billion of general revenue spending, and was helped by federal stimulus funds that are running out.
Florida’s unemployment rate in December remained at 12 percent, compared to an adjusted national figure in December of 9.4 percent, and requires high spending on jobless benefits while hurting sales taxes and other government revenues.
Leaders of the legislature agree government needs to reduce taxes and regulation. But they point to Florida’s forecast $3.6 billion budget hole and the tail-off of federal funds and say now may not be the time to provide tax cuts to businesses.
Additional reporting by Barbara Liston in Eustis and Michael Connor in Miami; Editing by Tom Brown and Eric Walsh