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POLICY INSIGHT
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In Florida, Latest TABOR Proposal Has Same Flaw as Predecessors

For the fourth year in a row, Florida’s legislature is considering a TABOR proposal. Florida Senate Joint Resolution 958 would impose an artificial cap on state revenues that would lock in recessionary levels of spending and hurt the state’s short- and long-term ability to invest in key areas of its economy (as it did in Colorado — the only state that has implemented a TABOR). The latest proposal differs from its predecessors in that it exempts funds for Medicaid spending that federal law requires Florida to undertake and phases in the revenue limit over several years. But as our new analysis shows, it has the same fundamental flaw as all of the TABOR proposals that came before it: a funding formula that doesn’t reflect the true cost of providing state services. The proposal limits annual revenue increases to the combined growth rate of inflation and population.  But changes in overall population mask faster changes that may be happening within subsets of the population.  In Florida, the obvious subset is seniors, who generally require more public services than other groups and whose numbers are growing more than three times as fast as the state as a whole. And the proposal’s inflation measure, the Consumer Price Index, covers what individuals buy, not what governments buy. Common sense tells us that it makes no sense to limit the growth in state spending on schools to the growth in the cost of food; the cost of the former grows much quickly than the cost of the latter.  This flaw would inevitably cause a gradual deterioration of services. We estimate that by 2026, Florida’s revenues as a share of the economy would be 26 percent lower than in 2015, when TABOR would take effect. That decline is equal to about half of the state’s spending on education. This TABOR could also restrict the state’s ability to invest in key areas of the budget. Research has shown that artificial revenue limits tend to raise concerns among investors that a state may have difficulty paying its debts in the future. Such concerns could result in lower bond ratings and higher borrowing costs for Florida, which in turn would reduce the state’s ability to build infrastructure and would squeeze other areas of spending. In past years, Florida and other states have listened to Colorado’s cautionary tale and rejected TABOR because it does more than control state spending, as its proponents often claim. It requires massive reductions in vital services that residents want and need — education, health care, public safety, roads, environmental protection, and others. This latest TABOR is no different.