February 26, 2015

Policy Recommendations

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This study has documented Florida’s fiscal conservatism and fiscal responsibility over a period of two decades, a policy that has been popular with many Floridians but criticized by others who argue that greater state government spending in environmental preservation, education, infrastructure, and many other areas would benefit Floridians. One way to weigh these conflicting preferences is to observe how people have reacted to the state government’s consistent fiscal conservatism. One metric is to look at how Floridians have voted, and they have consistently voted for fiscally conservative candidates. Not only have Florida’s House and Senate been majority-Republican since the 1990s, but the majority of legislators have also consistently espoused the fiscal conservatism that has characterized Florida’s fiscal policies. It appears that when given the choice, a majority of Floridians choose fiscally conservative legislators (and governors).

Another metric is to look at how people vote with their feet. Florida, the fourth-most populous state, has seen an increase in population from 13.7 million in 1993 to 19.9 million in 2014, an increase of 45 percent. Florida is now the third-most populous state, having recently passed New York, which saw its population increase from 18.2 million to 19.7 million over the same two decades, an increase of only 8 percent. California, the most populous state, saw its population increase by 20 percent over that time period, less than half the percentage increase in Florida. Texas, the second-most populous state, passed New York in those decades and saw its population increase by 42 percent. This is anecdotal evidence to be sure, noting that fiscally conservative Texas and Florida have had substantially higher population growth than the bigger-spending California and New York, but it does show that fiscally conservative states are not chasing away residents with their frugality. Population trends indicate that many people view them as attractive places to live.

Media reports of Floridians complaining about a lack of government goods and services are rare, and when they do surface, they tend to report that it is the government providers who believe their agencies are underfunded. Floridians tend to view living in a relatively low-tax state favorably. Taking a broad view of citizen preferences, looking at both the ballot box and migration trends, no backlash has manifested itself against the state’s two decades of fiscal conservatism.

The paragraphs above suggest that on net, Florida’s fiscally conservative government appears consistent with a majority of citizens’ preferences, but there is a larger and less controversial aspect to fiscal conservatism as well: Florida’s government is living within its means. The state has not spent more than it has had coming in. It has not resorted to tax increases to support spending, even when revenues have fallen. And among the states, it has one of the lowest levels of unfunded liabilities. Florida’s fiscal conservatism has also come with fiscal responsibility. Often it has been the big-spending states that have also been the least fiscally responsible. Florida’s elected officials deserve some credit for their fiscal responsibility.

There are, however, some policy issues looming ahead that Florida’s state government will need to address. 

Taxing Internet Sales

Continued interest from some legislators in joining the Streamlined Sales Tax project is a potential threat to the autonomy of Florida’s largest source of tax revenue. It would place the structure of the sales tax under the control of a multistate consortium, and the SST rules change frequently. The status quo is a far better policy option than joining the SST, so future Florida legislators should resist this initiative.

Pension Reform

The push by the legislature and by Governor Scott toward shifting the state pension system away from a defined benefit system to a defined contribution system will be good for the state and ultimately for state (and local) government workers who are covered by the pensions. Current proposed reforms to convert the Florida Retirement System to a defined contribution plan do not go far enough, however. Many private firms manage defined contribution pension plans, so in addition to shifting the system to a defined contribution plan, it should be completely privatized, shutting down the state system after the last recipient of a defined benefit plan dies and shifting all retirement plans to private firms who specialize in running retirement programs.

Property Insurance

There is widespread agreement about the desirability of reducing the exposure of Citizens Property Insurance Corporation, the state-owned and state-operated insurance company. Floridians have been fortunate that a hurricane has not made landfall in the state since 2005, but a major storm could impose substantial costs on the state. Elected officials should act now to avoid burdening Florida’s taxpayers when the next hurricane inevitably strikes.

Land Use Planning

Although Governor Scott signed the legislation that abolished the Department of Community Affairs and eliminated most statewide oversight over land use planning,burdens from the former system remain. Florida’s Regional Planning Councils are now pursuing the policies that the Department of Community Affairs oversaw, and local governments built substantial growth management bureaucracies in response to the requirements of the 1985 act. Florida policymakers should rein in the activities of the Regional Planning Councils and push toward a more market-oriented land use policy. The prosperity of Florida depends on the state creating a business-friendly atmosphere, and land use planning is one of the areas in which Florida has fallen well short.

Regulation

Florida is a low-tax and low-spending state, but not a low-regulation state. Regulations always work to constrain the choices people can make, and state policy should be oriented toward reducing regulatory barriers to economic activity. In addition to land use planning, Florida has occupational licensing laws that prevent people from engaging in professions that require little in the way of formal training. Barbers must be licensed in Florida, but how much training does it require to cut hair, and if a barber makes a mistake, how bad are the consequences? Interior decorating is another licensed occupation, but again, what are the consequences of allowing unlicensed decorators to work in Florida? Regulations stand in the way of people making choices for themselves, so any infringements against personal liberty should be resisted and repealed.[1]

In a comparison of states, the Institute for Justice ranked Florida as the fourth-most-burdensome state for occupational licensing requirements, and the seventh-worst when comparing both the burden of licensing requirements and the number of occupations that require state licenses.[2] Should the state really have a say in who can cut people’s hair or decorate their homes? Anyone who takes seriously the American ideal of freedom must recognize that freedom has to mean that people be allowed to make what other people might view as bad choices.


[1] Patrick McLaughlin, Jerry Ellig, and Dima Yazji Shamoun, “Regulatory Reform in Florida: An Opportunity for Greater Competitiveness and Economic Efficiency” (Working Paper No. 14-09, Mercatus Center at George Mason University, Arlington, VA, March 2014), https://www.mercatus.org/publication/regulatory-reform-florida-opportunity-greater-competitiveness-and-economic-efficiency.

[2] See tables 7 and 8 in Dick M. Carpenter et al., License to Work: A National Study of Burdens from Occupational Licensing (Washington, DC: Institute for Justice, 2012).