Legislative session renews debate on jobs

Facing another year of high unemployment and tepid economic growth, state leaders opened the 2012 legislative session with an economic agenda that’s geared toward cutting business costs but light on direct job-creation ideas.

Gov. Rick Scott called for another round of tax cuts, deregulation and government downsizing, an economic blueprint that top lawmakers are following in the session that began last week.

Scott and legislative leaders say the indirect approach helped Florida add 120,000 jobs last year by providing a stable business environment.

But critics say that any job growth stemmed from national trends, and that slashing state programs to save money is hampering a more robust recovery.

“Don’t paint a rosy picture that’s not there,” said Sen. Thad Altman, R-Viera, questioning Scott’s touting of the jobs picture, which includes a 10 percent unemployment rate, fifth-highest in the nation. “We haven’t even begun to really solve our jobless problem.

“Simply being anti-government, that’s not going to employ people,” Altman added.

Such views have been largely drowned out in the Republican-majority Legislature in recent years as top lawmakers repeatedly pushed to reduce government spending. Five years into the worst economic conditions since the Great Depression, Florida’s debate over  recovery has centered around a narrow spectrum of limited government proposals. Lawmakers have settled into a cycle of budget cutting, arguing that holding down taxes will prime the state for recovery.

Scott wants $230 million in incentives to lure new businesses, but legislative leaders are unlikely to set that much aside after providing less than one-third of the $300 million Scott requested for the program last year.

Few other direct job-creation proposals are up for consideration in the Capitol this year, and some proposals are likely to result in big short-term job losses as lawmakers again look to cut state spending.

Scott is proposing to close the state’s $2 billion budget gap with big cuts to hospital Medicaid payments, a move hospital officials say could cost thousands of private-sector jobs. Another 1,300 jobs would be lost from Scott’s proposal to close seven state prisons. Scott’s budget calls for a total reduction of 4,500 state jobs.

The approach is similar to last year’s, in which lawmakers approved a budget that also cut 4,500 state government jobs. Schools, water management districts and other agencies that lost state funding cut thousands more positions. Hospitals lost $500 million in Medicaid payments.

Government workers who kept their jobs had less money to spend after lawmakers cut salaries by 3 percent to balance the budget and fund pension costs.

While some of the moves may have contributed to Scott’s low  approval ratings, in his State of the State address the governor stayed the course.

“There is something arrogant and overreaching in thinking we have the superior wisdom to micromanage the economy,” he said.

‘Great destroyers’

Scott called taxes and regulation “the great destroyers of capital and time for small businesses” and pledged to cut both, an approach echoed by House Speaker Dean Cannon and Senate President Mike Haridopolos last week.

“The three primary obstacles to economic expansion and job growth are typically taxation, litigation and regulation,” Cannon said.

Cannon and Haridopolos worked with Scott to repeal one of the state’s most controversial regulations last year, the growth management laws governing new housing and commercial developments.

This year, lawmakers want to reduce professional licensing requirements for jobs like interior designers and auctioneers, eliminate certain nursing home regulations, repeal restrictions on septic tanks and fertilizer usage and suspend the practice of forcing developers to pay for new roads and schools.

And after cutting water management district property tax rates by $700 million last year, Scott wants to review other special taxing districts and exempt an additional $25,000 in corporate income from taxation. The proposal would allow 25 percent of businesses to pay no tax at all.

Cutting taxes and regulations is popular with many lawmakers, but some have doubts of how much the moves will help the economy.

“Our tax base right now in Florida is pretty low as it is,” said Dennis Jones, R-Seminole. “I think something like a good university system is a whole lot more important to attracting good, clean industry than some little haphazard tax break.”

Do low taxes work?

New College of Florida economics professor Richard Coe said companies look beyond their tax bill when relocating.

“In general, the economic literature would suggest pretty strongly that businesses aren’t necessarily attracted to states with low taxes,” Coe said. “They look at the whole package, services versus taxes.”

Investing in education and public infrastructure are two good ways to encourage economic development, Coe said.

Scott has made education more of a priority this year, proposing a $381 million overall increase in K-12 education spending after cutting $1.35 billion from public schools last year.

In New York City, Republican Mayor Michael Bloomberg recently offered $400 million in land and infrastructure improvements to lure a new science and technology-focused university campus. Top schools like Stanford and Cornell competed for the project.

Ohio offers money to new businesses and pays for infrastructure programs like industrial parks. Ohio voters passed a $700 million bond measure in 2010 to support the program, which the state’s Republican governor called “the single most effective tool we have to create jobs and spur economic development in Ohio.”

“You won’t get borrowing costs any cheaper, so now is great time to do some good public infrastructure investment,” Coe said.

Business incentives

The governor’s request for $230 million in business incentives may be his most aggressive effort to directly influence economic activity.

Last year the Legislature approved $93 million out of the $300 million Scott requested for the fund. The governor held press conferences throughout the year touting each new company that received an incentive package to relocate.

Top lawmakers seem inclined to give the governor another pot of money this year but won’t say how much. Critics call the incentive money corporate welfare and recent reports indicate companies often do not create the number of jobs promised.

Florida State University economics professor Randall Holcombe said the incentives make better politics than policy.

“Politically it’s attractive when you can show up there and they have the shovels out preparing the site and you can say hey our incentive dollars attracted this company,” Holcombe said.