REP. RAY SANSOM: Tapping reserves is fiscally irresponsible quick fix

Florida House budget chief: Spend only what we can afford

Rep. Ray Sansom
Special To The Sentinel
South Florida Sun-Sentinel–Mar. 19, 2008

At first blush, spending budget reserves in order to maintain a balanced budget next year seems like a good idea (“In Tough Economic Times, Florida Lawmakers Ought to Dip into Reserves,” March 14). But using money from the state’s financial safety net to plug ongoing budget reductions would only dig our state deeper into economic and budgetary uncertainty.

Florida’s budget resembles the family checking account since lawmakers can’t spend more than we have and by law we must keep the budget in balance. The state’s general revenue comes primarily from sales and corporate tax receipts, and now with a slowing economy, and declining sales-tax receipts, the state has less money this year than it did last year. The impulse by many during challenging economic times is to look for the quick fix or raise taxes.

The Orlando Sentinel’s Editorial Board is not alone in pushing for the state Legislature to spend reserves to “solve” this year’s budget problem. But there are several reasons why this short-term thinking is both wrong and fiscally irresponsible.

First, the state does not have $5.5 billion in liquid reserves. House economists estimate the state’s total reserves to actually be $5 billion, some in general revenues, some in trust funds, and almost half in the Lawton Chiles Endowment Fund, the state’s portion of tobacco-settlement revenues set aside for financing children’s health programs, child welfare services and elder programs.

Spending the Chiles’ endowment dollars would mean spending the principle of the long-term savings for our children and seniors, a practice that should be guarded against closely.

$1.35 billion of those reserves are held in the Budget Stabilization Fund, the state’s constitutionally required savings account, commonly referred to as the rainy-day fund. By law, the Budget Stabilization Fund may be used for emergencies such as hurricanes and wildfires, and any money borrowed from this account is required to be paid back.

While our current budget shortfall is unprecedented, it does not rise to the level of emergency that a Category 5 hurricane striking a major city or a terrorist attack does. If we spend the funds in our financial safety net now, we may not have the critical funds needed to help recover from potential disasters in the future. In addition, if we spend money from this account now, there are no guarantees that future leaders will have enough money to rebuild and repay our savings later.

Using our state’s savings account to fill the budget shortfall this year means the shortfall will be there again next year, but our savings will not. While we remain confident that the underpinnings of our economy are strong, if this slowdown is prolonged — and state economists expect the slowdown to last at least two years — what revenues would state leaders use next year to pay for recurring expenses if we spent our savings today?

Spending one-time reserves to fund recurring budget costs highlights the fact that our problems exist today primarily because Florida’s budget has grown to a size that is no longer affordable. During recent flush economic times, growth in state spending has far outpaced population increases and inflation. In 1997, state government spent more than $2,400 per citizen. Even with record population increases, last year state government spent more than $4,000 per citizen. This means state government spent 65 percent more per citizen last year than it did just nine years earlier.

Instead of using one-time savings to continue government spending at unsustainable levels, the more prudent approach would be to eliminate wasteful spending, identify inefficiencies in state government to maximize the value of every tax dollar entrusted to the state’s treasury, and prioritize spending first and foremost on the essential services provided by government.

Tearing apart our state’s financial safety net in order to create a patchwork of budget fixes is a politically expedient yet fiscally problematic approach. By remaining fiscally responsible and focused on the long-term financial health of Florida, state legislators can help our state profit from making the tough choices now and move us into a stronger position to recover from this slowdown.

There will not be many easy budgetary decisions this year. But just like any responsible family, House leaders are going to sit down with our checkbook, set real spending priorities for our future, and spend only what we can afford. What we won’t do is whine, complain or hit the panic button and increase taxes.