Scott's attempt to fulfill property-tax promise backfired

Article Courtesy of The Orlando Sentinel

By Aaron Deslatte

Published January 2, 2012


TALLAHASSEE Gov. Rick Scott was following a well-read playbook when he campaigned in 2010 to kick-start the economy in part with deep property-tax cuts.

It just didn't come off as scripted.

Capping out-of-control property-tax spikes was once a surefire appeal to voters in Florida so much so that Scott made "long-term relief" an integral part of his "7-7-7" campaign plan two years ago. Cutting property and corporate taxes was the single largest job-creating element in the plan, projected by his campaign economist to generate 364,000 jobs after seven years.

But Scott's first-year call to slash school property taxes flopped with legislators who nonetheless cut $1.38 billion from public-school spending. And his second-year push to cut tangible-personal-property taxes for businesses was defeated by voters at the polls in November.

Now, facing a potentially difficult re-election in 2014, Scott has replaced his property-tax pledge with a campaignlike mantra to do no further harm to public schools.

"If I can reduce property taxes, I'd like to reduce property taxes," Scott said in a recent interview. "But I want to make sure I continue to increase funding for K-12, for our universities and state colleges, to the extent we can create accountability."

In part, the governor's role reversal can be attributed to parents such as Kathleen Oropeza, who mobilized opposition to deeper school cuts and helped scramble the tax-cutting calculus.

In response to school-funding cuts in 2008, at the start of the Great Recession, Oropeza and two other Orlando-area mothers formed a group called Fund Education Now to pressure policymakers to stop cutting classroom dollars. Along with lawyers including former House Speaker Jon Mills, the group has filed a lawsuit challenging Florida's school-funding levels.

"Public education depends on [property] taxes," Oropeza said. "For someone who was supposed to be such a business whiz, why didn't [Scott] realize if you displace that revenue stream it would leave a hole somewhere else?"

Actually, Scott did. The governor's original plan combined a whopping $1.4 billion first-year cut to the $6.9 billion in school property taxes that Florida requires local districts to collect called the "required local effort" with a pledge to slash other programs so that "not one dollar is shifted away from our schools."

It just didn't work out that way.

Lawmakers rejected Scott's proposed budget cuts among them, laying off 8,000 state workers and slashing $1 billion from prison spending. But they did cut state education funding by $1.38 billion by refusing to replace federal-stimulus funds, which President Barack Obama got through Congress in 2009, that were drying up.

Scott still denies he cut school funding at all. 

"Education was not cut. The federal government cut education funding," he said. "We kept education funding flat. And the second year we increased funding by over $1 billion" actually about $843 million in state dollars.

Legislators say it was never in the cards to give the governor massive property-tax cuts at a time of deep revenue shortfalls, especially when the public wasn't clamoring for relief.

"For us to go ahead and try to cut property taxes at the same time when we were cutting spending on other issues particularly education there was just no place to fill the hole he was talking about digging," said Sen. David Simmons, a Maitland Republican who chaired the Senate's PreK-12 education budget committee in 2011.

The education cuts dropped per-student spending to 2002 levels and were a political disaster for Scott.

When the governor signed the budget in June 2011, he immediately tried to shift the blame to lawmakers. Scott vetoed more than $600 million in spending, including hometown "member" projects, and demanded that these dollars be shifted back to schools something lawmakers couldn't legally do.

Schools statewide responded by cutting back on arts, PE and athletics, and reducing staffs. Though the base level of per-pupil funding provided to classrooms had been eroding since it peaked at $7,263 in 2007, it nose-dived in 2011 to $6,224, or a decline of $586 per student.

Parents took notice.

"His impact was felt last year where [per-pupil funding] went down," said Linda Nestor, president of the Broward County Council of PTA/PTSA. "It still is not up to the level it was the year before he took office, even though costs have gone up."

So what has Scott accomplished on the property-tax front?

That question is complicated by the reality that property taxes have declined in Florida since the heyday of the housing boom.

Property appraisers attribute that to two developments: the Great Recession and the underlying housing bust that sent home and business values downward; and the constitutional amendment voters adopted in 2008 that, among other changes, doubled the $25,000 property-tax exemption for resident homeowners.

From 2005 to 2007, the school "taxable value" of real estate statewide increased by an average of 18 percent annually to a peak of $1.8 trillion. Since then, it has fallen every year, to $1.37 trillion this year; the two biggest declines came in 2009 and 2010, before Scott took office. It is projected to increase next year for the first time since 2007.

"The only way we can recover and start coming up is when we hit bottom," said Clay County Property Appraiser Roger Suggs, immediate past president of the Florida Association of Property Appraisers. "It looks like we may be getting close."

Public pressure for property-tax relief has diminished as home values declined.

For instance, property-tax-bill challenges petitions filed with county value-adjustment boards exploded during the real-estate boom and continued during the bust, as petitioners claimed assessors hadn't lowered their values sufficiently. In 2009, petitions topped 298,000, according to state Department of Revenue data.

But a year later, they fell to a bit more than 199,000 and plummeted to just more than 40,000 in 2011 although not all counties have filed data yet.

Senate President Don Gaetz, R-Niceville, said recently that lawmakers could "declare victory and congratulate each other that property taxes are no longer an issue.

"Apparently the job's been done in bringing those down."

So instead of delivering his promised blockbuster school property-tax cuts, Scott made a rookie deal with lawmakers that capped taxes levied by the state's five water-management districts.

The move, he said, would save more than $200 million in property taxes statewide. For the average homeowner, the savings ranged from a few dollars in North Florida to around $40 in Orlando and $140 in South Florida.

"Some people put it in terms of saving enough to buy a pizza," said Janet Bowman, legislative-policy director for The Nature Conservancy.

But the cuts meant the districts had to slash staff and scale back on big-ticket projects. Bowman said the changes though a drop in the bucket for most homeowners severely affected land conservation and water-quality and -quantity efforts statewide.

A year later, Scott and lawmakers repealed the caps but added new "accountability" requirements limiting the districts' spending discretion.

That decision had consequences, too. In October, Moody's Investors Service downgraded the South Florida Water Management District's credit rating on $489 million in debt, because of "diminished district autonomy and a reduced level of district revenues, primarily property taxes, to repay debt service."

In perhaps the most glaring sign of the times, voters this fall defeated the beefiest property-tax proposal to go to the ballot: Amendment 4, which would have given tax breaks to second-home owners and imposed a 5 percent cap on tax increases on commercial property along with Scott's proposal to cut taxes on equipment and furniture owned by businesses.

"I don't believe [Scott's property-tax pledge] will go unfulfilled," said Florida Realtors Executive Vice President John Sebree, a lobbying force for property-tax relief in recent years.

"It just won't happen as quickly as he might have hoped."