Florida's budget cuts cost tens of thousands of jobs; take billions out of the economy

From the Orlando Sentinel

by John Kennedy

TALLAHASSEE— The $69.7 billion state budget now before Gov. Rick Scott will send tremors through Florida's struggling economy, with school districts, hospitals and other big employers soon cutting jobs and programs because of a sharp drop in taxpayer dollars, economists say.

Scott has generally praised the spending plan for shrinking government, cutting regulations and reducing taxes. He says it will spur private business expansion and fulfill his campaign pledge to create 700,000 jobs over seven years.

Many analysts aren't so sure.

More certain, they say, is that state government's pullback will lead to at least a short-term reduction in dollars coursing through Florida. It could add to the state's 10.8 percent unemployment rate, they warn.
"A reduction in state spending? Well, first, that's just going to reduce jobs," said David Denslow, head of the University of Florida's Bureau of Economic and Demographic Research.

"It's going to be another headwind in the economic recovery," said Denslow, an occasional adviser to the Republican-led legislature. "You're cutting employment, reducing infrastructure spending and lowering the amount of money going to communities. That's going to have a negative effect."

Scott has until June 1 to act on the budget. But critics say a foreshadowing of its impact came the day lawmakers sent him the plan last week: Broward County announced 1,400 teacher layoffs.

GOP sees path to growth

Almost all school districts in Florida are eliminating jobs. Palm Beach County is poised to close a $35.4 million budget hole by cutting more than 700 positions, including custodians, school monitors and school police officers.

In Palm Beach and most of Florida's other 66 counties, school districts are the biggest employers.

Scott said his objective is that "overall our state grows, making sure we grow private sector jobs. You know, governments, just like the private sector, have to figure out how they can spend their money better. And everybody is doing that. My job is to do everything I can to not waste taxpayer dollars."

The governor has said the state's improving jobs picture affirms his approach.

State officials announced Friday that Florida's 10.8 percent unemployment rate for April was the lowest monthly level since September 2009. The state also has been gaining jobs for seven consecutive months.

"I believe we're on the right path," said Rep. Doug Holder, R-Sarasota, chairman of the House Economic Development and Tourism Subcommittee, who led legislation (CS/HB 7005) that reduces to 23 weeks the maximum period to collect unemployment benefits, down from 26 currently.

"We've tried to be cautious with our reductions," Holder added. "I think we'll see an uptick, and I'm hoping (for) that, personally and as a legislator."

Randall Holcombe, a Florida State University economist and senior fellow at the conservative James Madison Institute, also said the budget's overarching goal of keeping money in the private sector will yield returns.

A $210 million property tax cut and $30 million reduction in corporate income tax will give more businesses money to spread around the economy, he said.

"The only way you can put more money into school districts is through taxes, taking money from the private sector," Holcombe said. "And higher taxes discourage economic activity."

But those hit hard by pending budget cuts see bleak near-term effects.

Hospitals must slash

Hospitals, another big employer, will see their Medicaid payments cut 12 percent.

For Bethesda Memorial Hospital in Boynton Beach, that will cost $4 million; St. Mary's Medical Center in West Palm Beach faces the county's biggest reduction, $7 million, according to the Florida Safety Net Hospital Alliance.

Keith Myers, president of MorseLife in suburban West Palm Beach, which operates a 280-bed nursing home, the Joseph L. Morse Geriatric Center, is struggling to cover a 6.5 percent statewide cut in Medicaid payments lawmakers dealt to nursing homes.

For Morse, that amounts to a drop of more than $860,000, jeopardizing services and jobs at the facility, which employs 520.

"We won't cut frontline staff, but I'm perplexed about what I'm going to do," Myers said. "The state's reduction is definitely going to have an impact."

Facing an almost $3.8 billion shortfall, lawmakers approved a budget that cuts $2.6 billion from spending on public schools and health and human services. Schools will receive their lowest level of funding in six years: $6,267 per student, an almost 8 percent reduction.

The budget cuts the state's workforce by 4,500 positions, 1,700 of which are filled, to 122,236 employees. It also privatizes prisons in the state's 18 southernmost counties, including Palm Beach and the Treasure Coast, clouding the future of about 3,000 corrections workers.

Widespread concerns

An additional $150 million is pulled from the state's transportation trust fund and used to patch holes elsewhere in the budget. Road builders and business groups are urging Scott to veto the shift, saying it will blunt transportation work that could yield thousands of jobs.

In another reduction certain to send ripples, more than 7 percent of the state's overall workforce - 655,000 teachers, firefighters, police and other government employees - also will absorb pay cuts as lawmakers pull 3 percent pension contributions from them.

That amounts to $1.1 billion in new revenue that helped close the state budget gap.

The contributions mark the first time since 1974 that those in the Florida Retirement System have to pay toward their pensions. The move ends what had been one of the nation's few remaining fully taxpayer-financed plans.

School employees represent the largest share of the Florida Retirement System. And their contributions will bring $850 million into school budgets, partially offsetting the $1.3 billion cut to education, analysts said.

"I'm having a hard time seeing more than just this impact on our school district," said Mike Burke, the Palm Beach County School Board's chief financial officer. "But these cuts are sure to be felt through communities."

Even as employment brightened in April, the state's consumer confidence level fell for the third straight month, the University of Florida said. Rising gas prices, international upheaval and the federal budget battle are chiefly blamed.

But Chris McCarty, director of UF's Survey Research Center, also said the looming state spending cuts are a key factor.

"There's a lot of people who have reason to be pessimistic," McCarty said.

http://www.orlandosentinel.com/business/pb-florida-budget-cuts-stir-job-concerns-20110522,0,3595314,full.story