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State/Local Revenue Caps Could Cripple Economic, Hurricane Recovery

Not only is Florida's private economy staggering, its state and local governments undercut by worsening economic trends and a decade of deep tax cuts, now face their worst fiscal crisis since Franklin Roosevelt was president. 

But some want to use the economic crisis to expose Florida's governments—and citizens—to even more fiscal risk.  They propose putting complex government revenue caps into the state constitution.  Based on experience elsewhere, these types of caps could cripple the ability of the state, cities, counties and other jurisdictions to get financing for responses to Florida's worsening problems, or to support public services vital to Florida residents, visitors and businesses.

"Revenue caps may sound good on paper, especially in a time when we’re all struggling to make ends meet," says Lori Parham, AARP state director.  "But the fact is that today’s economic turmoil makes this the worst possible time to consider rigid revenue caps for government."

• Florida moved from being the nation's leader in job growth in 2005 to the nation's leader in job loss in 2008, according to reports by the Florida Agency for Workforce Innovation.
• Over the last two years, Florida has cuts its state budget by $6 billion.  State forecasters expect an additional $5.8 billion revenue shortfall by June 2010, according to the Florida Consensus Revenue Estimating Conference .
• Even before this dramatic drop, Florida's per-capita state government expenditures ranked in the bottom 10 states in the nation, according to the national Federation of Tax Administrators.   Florida continues to be near the bottom in national rankings for health care coverage, pension coverage, per-pupil school spending and support for universities, said multiple studies on government programs.
• After having cut libraries, parks and payrolls last year, Florida cities and counties now face 8- to 10-percent budget cuts this year.  At least one city, Tampa, is warning that it may be forced to dip into a reserve fund that city officials would prefer to keep available to respond if a hurricane sweeps into their low-lying city, according to Tampa city officials. 

If Florida's state and local governments were saddled with rigid constitutional revenue caps, those governments could find it nearly impossible to get financing for local projects – whether it's for hurricane recovery, infrastructure projects or a bold green-energy initiative. 

That won't work, Parham said.  "Bond investors require sustainable government funding before they will invest in public projects," Parham noted.  "Revenue caps would make it extremely difficult for state and local government to get financing for needed initiatives, or, at the least would likely drive up interest costs.  In the long run, taxpayers would lose, not win."

It's already happened in Colorado, the only U.S. state to adopt constitutional revenue caps.  In that state, issuing government bonds became so costly, and revenues were so tight, that many road, bridge, school and other construction projects had to be put on hold.  Because public services suffered, business and residents began to suffer, too.  Worse, as new issues and concerns arose, state and local governments and their citizens weren't able to respond. 

Colorado's situation grew so bad that that its voters decided to put a moratorium on the constitutional revenue caps for five years while they worked to repair the damage.

"AARP will fight placement of ill-conceived revenue caps into the state constitution," Parham said.  "We expect several proposals to be put forward to cap local and state government revenue during the year.  Nobody wants unnecessary government spending, but now is not the time to tie the hands of the leaders we elected.

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