Florida's Scott takes businessman's ax to budget

Reuters Business News
Posted: Feb 15, 2011 8:50 AM
Florida's Scott takes businessman's ax to budget

By Tom Brown

MIAMI (Reuters) - Many newly elected Republican governors have pledged to run their states like a business as they grapple with low revenues and multibillion-dollar budget gaps with little relief from a fragile U.S. economic recovery.

But since they took office last month, few have gone as far in advancing campaign promises for less government and lower taxes than Florida's Tea Party-backed Governor Rick Scott.

A political newcomer, with a controversial past as chief executive of a healthcare corporation that paid a record $1.7 billion in fines for defrauding Medicare and other federal programs, Scott has taken to the job of running the fourth-largest U.S. state like a hostile takeover.

An uncompromising conservative, Scott unveiled his first budget last week at a rally attended by about 1,000 Tea Party activists in a Baptist church hall in Eustis, a town some 200 miles outside the state capital Tallahassee, where the state legislature will have to approve his proposed budget.

"Governor Scott said he wanted to present the most conservative budget in the nation," said Alan Stonecipher of the nonprofit Florida Center for Fiscal and Economic Policy.

"It certainly appears to be hugely pro-business which was his stated intention," Stonecipher added. "I would say Florida is right in the mix, or maybe leading the nation, in a movement to, in effect, eviscerate government."

Even by the standards of a state renowned for political scandals and shenanigans, 58-year-old Scott, who has emphasized that he was never charged with any crimes as CEO of the giant Columbia/HCA hospital chain, has raised eyebrows.

His declared intention to cut regulations and taxes, and a 'slash-and-burn' approach to putting Florida's financial house in order with little apparent regard for real-world implications, have prompted warnings of dire consequences.

There may be backlash against Republicans in a presidential battleground state as the new governor, who has never served in elected office before, takes budget-slashing to new heights.


The carefully orchestrated budget presentation cast Scott, who beat his Democratic rival by a single percentage point after spending $73 million of his personal fortune on his own campaign, in the role of a Tea Party man of the people.

But he also ranks among the most unpopular newly elected governors in U.S. history, with a favorability rating of just 28 percent, according to a recent Quinnipiac University poll.

Critics cited his budget proposals -- deep cuts in state spending on education and healthcare to close a deficit of nearly $4 billion, while slashing corporate income and property taxes -- as signaling a disconnect between fiscal conservatives and ordinary Americans reeling from unemployment and the loss of homes and benefits in the recent recession.

"Retreaded voodoo economics," Florida Senate Democratic leader Nan Rich said of Scott's budget plan, referring to the trickle-down economic theory popularized under President Ronald Reagan. "The tentacles of this budget will reach the most vulnerable people in our state," Rich told Reuters.

She said the real trickle-down effect would add to the pain of most Floridians while leaving open many tax loopholes in a state that is home to some of the Republican's richest patrons.

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 the economic stimulus program of 2009.

According to the Center on Budget and Policy Priorities, nearly all states are considering spending less in fiscal 2012 than in 2008. That was the last year before recession devastated revenues.

The nonpartisan center has warned that reduced spending on education, healthcare and other important services will delay the U.S. recovery and undermine efforts to create jobs, especially in states where new Republican governors like Scott are pushing for corporate tax cuts.

Illinois, where Democratic Governor Pat Quinn successfully pushed a hefty income tax increase to ease a $15 billion budget deficit through the legislature last month, is a rare exception to a national trend toward flat or lower taxes as the best tool to lure investment to recession-hit states.


Florida is less distressed than Illinois and some other states, where the fiscal crisis has roiled the traditionally stable $2.8 trillion municipal bond market and spurred proposals by some U.S. lawmakers to consider allowing states to declare bankruptcy.

But the Sunshine State is an epicenter for the collapse of the U.S. housing market and the mortgage crisis. It is also has a record 12 percent unemployment rate, the third highest in the country after Nevada and California.

Scott's budget includes a call to cut the state work force by nearly 9,000 jobs and it would require state workers, who have not had a general pay raise in five years, to contribute 5 percent of their salaries to their pensions.

His budget, apart from a vague promise of attracting business investment, appears to hold out little immediate hope for job creation. And he has proposed shifting more of the cost businesses pay for jobless benefits onto Florida taxpayers.

Such controversial proposals have been welcomed by business groups and by his Tea Party supporters.

Tom Gaitens, Florida state director of FreedomWorks, a libertarian group, which works closely with Tea Party activists and is headed by ex- U.S. House of Representatives Republican leader Dick Armey, said he was "very proud" of Scott.

"Even if you don't agree with him, you have to give the guy credit for making hard decisions," Gaitens said. "As a businessman, not as a politician, he understands that the capital that fuels the economy has to be left in the people's hands, not in the government's," he said.

But Scott's initiatives drew sharp criticism elsewhere.

"I'm very disappointed to have these tax cuts put money into well-to-do corporate pockets and abandon the needs of our most fragile and dependent citizens," said Pouria "Paul" Bidhendi, 37, the owner of two businesses, including a job recruiting and staffing company, in Orlando.

"He comes across as this super rich guy talking down to poor people," said John Faherty, 49, an event management consultant. "He's like an alien trying to talk to us."

Gaitens said the Tea Party probably has less than 200,000 active members across the state, but has punched well above its weight. This was reflected in media coverage of personalities like Florida's new U.S. Senator Marco Rubio, a Tea Party-affiliated Cuban-American who is considered a rising star of the Republican Party.

The rank-and-file Tea Partiers' obsession with government spending and deficits also runs counter to recent polls such as a Gallup survey showing that most Americans see joblessness as the country's leading cause of concern by far.

But the Tea Party and its rich supporters are in lockstep with big business in using the fiscal crisis to try to weaken organized labor, analysts say.

"That's the great hope of the far right conservatives. They're seizing the moment of fiscal crisis to either destroy or cripple the labor movement," said Harley Shaiken, a labor expert at the University of California at Berkeley.

(Additional reporting by Barbara Liston in Orlando, Michael Peltier in Eustis, Jeff Mayers in Madison, Wisconsin, and Lisa Lambert in Washington; Editing by Pascal Fletcher and Christopher Wilson)