Gov. Rick Scott kicks off his revolution at inauguration
As the state enters the fourth year of state budget cuts, with jobless numbers that continue to outpace the nation and a housing market that collapsed and has now been restored to merely gasping, Gov. Rick Scott is casting himself as Florida’s economic savior.
Florida’s New CEO Gets To Work Facing high unemployment and a budget crisis, Rick Scott’s plan is to focus on luring new industry to the Sunshine State and putting unemployed workers back on the job By John Kennedy Originally published in the Feb/Mar 2011 issue of 850 Business Magazine
“It’s important to recruit companies from around the world, it’s even more important to support the homegrown successes in our own backyard.” — Gov. Rick Scott
Under a bright January sun, the political — and maybe economic — future of Florida was framed on a stage outside the state’s historic Old Capitol.
Seated in one chair was outgoing Gov. Charlie Crist. Tanned, with his shock of camera-ready white hair, Crist smiled and winked, tapping a toe as a Tampa girls’ choir sang.
He looked relaxed. He was Charlie. But his ease may also have been helped by being a governor handing off a 12 percent statewide unemployment rate and a $3.5 billion budget shortfall to the man seated a few chairs away.
Rick Scott looked kind of tense, his features frozen in a pleasant grin. But Scott at times also looked like a man questioning the $73 million personal investment he made in a campaign that landed him on this stage, being sworn in as Florida’s 45th governor.
After all, the state’s battered economy gives a lot of people pause.
As the state enters the fourth year of state budget cuts, with jobless numbers that continue to outpace the nation and a housing market that collapsed and has now been restored to merely gasping, Scott is casting himself as Florida’s economic savior.
His inaugural address was anchored by promises of luring companies, creating jobs, shrinking the size of government and cutting red tape. Scott ended the speech with the line that will linger as his administration’s credo.
“Let’s get to work,” Scott concluded, drawing hopeful applause from the crowd of lobbyists, legislators and regular folks gathered for the change-in-command.
So, how does Scott do it?
It’s not hard to find skeptics.
Scott’s pledge to create 700,000 jobs over the next seven years — on top of the 1 million expansion already forecast by state economists — may prove one of the new governor’s tallest tasks.
“That just isn’t going to happen,” dismissed Sean Snaith, a University of Central Florida economist who recently forecast that state unemployment will remain in double digits through early 2013.
“He’s given himself some wiggle room with time,” Snaith conceded. “And the economy is out of recession and things will be picking up some in 2011 and 2012. That bodes well for creating jobs. But this economy has some real problems.”
Florida’s litany of woes is long.
The state has the nation’s second highest rate of home foreclosures, which continue to outstrip home sales statewide. While unemployment is expected to fall slowly, the Legislature’s economic forecasters say it will be spring 2016 before the state’s job market looks anything like 2007, when the jobless rate was less than 4 percent.
Median home prices in Florida, which soared to $257,800 in 2005, have slouched to $136,600, a decline of a stunning 47 percent. The drop in home prices has sparked sales in recent months — even in tourist-dependent and oil-spill tarnished Northwest Florida. But even these sales carry scars from the battered economy.
Typical of Florida’s imbalance, 58 percent of home sales last August were dwellings either in foreclosure or with delinquent mortgages. For businesses and homebuyers, bank credit also remains tight — with 42 Florida lending institutions having failed in the past two years.
Sen. Don Gaetz, R-Niceville, who had a career in health care running a hospice-services company, said Florida’s economy could be described by a term used in that industry.
“There’s a catch-all diagnosis when everything seems to be going wrong, called ‘multi-system breakdown,’ ” Gaetz said. “That’s not an inappropriate phrase to describe what’s happening in housing, employment and all the other indicators.”
Enter Rick Scott, who was handed the keys to this balky engine by Crist – who saw the state’s housing bubble burst on his watch and the unemployment rate triple. But he never really seemed to muster the energy or focus needed to slow the downward rush.
Scott, however, was tapped by voters clearly seeking some kind of turnaround titan for the state.
A political newcomer, Scott’s story is fairly well-known by now.
A relative new arrival in Florida, living seven years in Naples, Scott has a reported net worth of $218 million — the bulk of it coming from building Columbia/HCA Corp. into one of the nation’s biggest hospital chains before being booted out by its board three years before the company paid a $1.7 billion settlement to the federal government for Medicare fraud.
Scott was never charged criminally, and contends he exited the company before any alleged wrongdoing took place. His vast business empire now includes a wide-range of global investments, including Solantic Urgent Care, the health-care company he co-founded in 2001.
Scott has said he’ll put his wealth into a blind trust while serving as governor. And when he tells the story of his business acumen, Scott prefers the sugar-coated tale of the life lessons and money-making joys derived from the doughnut shop he and his wife opened 30 years ago.
But as governor, the new boss clearly sees getting Florida back on its economic feet as Job No. 1 — maybe his only job.
His inaugural address underscored that. While many governors seek to float on soaring images, Scott’s was more like a memo from the boss.
“We have to remember that modern businesses can locate anywhere,” Scott said. “If the conditions Florida offers aren’t the best, businesses go elsewhere.
“What does it take to create that favorable business climate? Florida has to offer the best chance for financial success. Not a guarantee, just the best chance.”
Then came what emerged as his signature line:
“Three forces markedly reduce that chance for success: taxation, regulation and litigation. Together, those three form the ‘axis of unemployment.’ Left unchecked, they choke off productive activity,” he said.
“We need to capitalize on our geographical location as the natural connector and distribution hub for the growing economies of Central and South America.”
Scott’s approach clearly shows he’s willing to kick-open the state’s door for business. Handing out tax breaks, lifting regulations, calling for more shields for companies worried about getting sued, the new governor seems to have no limits when offering what he can to seal the deal and court companies that might bring jobs.
Scott’s devotion to clearing the track for corporations is worrying quite a few — particularly environmentalists, unions representing public employees and teachers, and trial lawyers. All have been described by the new governor as obstacles to his jobs push.
While he’s trying to push them over, they also are certain to push back.
By contrast, Florida business leaders are enamored with the new governor — even though many earlier sent their campaign cash to Scott’s Republican primary opponent, Bill McCollum.
Susan Story, who until Jan. 1 was president and chief executive officer of Pensacola-based Gulf Power Corp., said she’s been impressed by Scott’s meetings with business site selectors, which began even when the new governor was working out of Fort Lauderdale, preparing to take office. Story has spoken with some who met Scott.
“I tell you, those site selectors thought he was awesome,” Story said. “There are some people who get it, and that’s great, and there are some people who get it and can do something about it.”
But while business leaders have found a soul mate in Scott, he is facing a restless Florida. Scott won the closest governor’s race in modern Florida history over Democrat Alex Sink — the narrow margin suggesting he doesn’t have a deep well of popular support.
Polls also show Scott hampered by high unfavorable ratings, a holdover from the hard-hitting campaign, his political outsider status and a public tired of the economic slump.
“Scott has plans that go out seven years, but I think he’s really only going to get seven months to make things happen,” said House Democratic Leader Ron Saunders of Key West.
Many of those on the Florida Panhandle, hammered by both the economy and last year’s BP oil spill, also said Scott’s talk sounded good — but it’s just talk.
“I think he’s got the right idealogy — it’s just a question of whether he can get it all through the Legislature. Then, that his approach works,” said Tim Edwards, owner of Fudpucker’s restaurants in Destin and Fort Walton Beach.
Edwards said his restaurants, which employed about 500 people a few years ago, have trimmed staff more than 20 percent because of the one-two punch of the lousy economy topped by the oil spill.
“As a business person, the fewer hoops I’ve got to jump through means it’s easier to expand,” Edwards said. “Banks aren’t lending much right now. But when we can, we can grow. And we create a lot of jobs. Not big money jobs. But jobs.”
Edwards said that Scott’s push to encourage development — he appointed Bill Buzzett, a former executive with The St. Joe Company, to lead the state’s growth management agency, the Department of Community Affairs — is needed in a state that remains mostly a one-trick pony spurred by development and tourism.
“Floridians have entrusted us with their tax dollars. They worked hard to earn those dollars. They badly need their money for other things.”
Scott also has been urged by advisers to double financing for the state’s tourism marketing arm, Visit Florida, bringing its bankroll to $62.5 million.
But along with an impatient public, Scott also must deal with legislative leaders, with whom his relationship is an inch deep. Senate President Mike Haridopolos, R-Merritt Island, and House Speaker Dean Cannon, R-Winter Park, both were early backers and financiers of McCollum’s campaign to defeat Scott.
The two leaders now pledge allegiance to Scott. But most Capitol watchers forecast friction between the executive and legislative branches over how to pull the state out of the economic abyss.
Haridopolos, whose ambitions include a likely 2012 U.S. Senate run against Democratic incumbent Bill Nelson, said he likes what he’s heard from Scott.
“We all share the same philosophy he espoused on the campaign trail,” Haridopolos said. “Now we all have the opportunity to lead.”
Despite a hemorrhaging state budget, Scott has got billions of dollars he wants to give away.
A property-tax break he campaigned on — eliminating the required tax that counties must now levy to fund schools — would save homeowners and businesses $1.4 billion a year. But, presumably, that would then require more state tax dollars be shifted into the schools budget to avoid a deep cut in education spending.
Scott vows to eliminate the state’s corporate income tax over seven years, slicing more than $1.8 billion from the treasury. The governor also wants to reduce unemployment taxes and cut more than $3 billion in electric utility costs for businesses, handouts that he said will spur job creation.
While Scott wants to give money back to businesses and homeowners, the state’s $3.5 billion budget shortfall shows that the leaky ship of state is going to need some plugs. But financing schools, health and social programs looks likely to take a backseat to helping businesses find their footing.
For now, the state’s pension and employee health care systems are vast repositories of money that could yield savings with relatively modest changes. But Florida’s finances still need work.
Scott has said he’ll cut the state’s already relatively lean workforce by 5 percent, potentially spiking unemployment in Leon County, where jobless levels have been below the state average.
Savings also could emerge from the governor’s plans to consolidate some state agencies — although it’s still an alphabet soup of possibilities over what could emerge from proposals to combine the Department of Health with the Agency for Health Care Administration, or other mergers.
Shrinking state government may take a while. Scott advisers have given him a more easy-to-read roadmap of business incentives, although each will likely nibble away at the revenue that traditionally funds state services.
Scott’s been urged to slash routine taxes and fees paid to the Florida Department of State by most businesses and freeze impact fees paid by developers for as much as two years, a bid to revive a staggered construction industry.
A capital investment tax credit, now set for companies that spend at least $25 million and create 100 jobs, could be lowered to include companies spending $2 million and creating 20 jobs. Payroll credits also could be expanded for companies that yield jobs topping 200 percent of state wages, advisers have told the governor.
Spending on Florida’s 14 ports, now at $36 million-a-year, could be boosted to at least $50 million in annual funding. Major port investment has been said to potentially yield 143,000 jobs, according to a Florida Chamber of Commerce report.
Transportation advocates also have urged the governor to block legislators from tapping the state’s road- and bridge-building trust fund, allowing it to replenish after a series of raids by legislators who diverted the cash to other state programs.
“Once we take the right steps, I am absolutely convinced that Florida will become the most exciting place in the world to live and work.”
Florida business groups have been clamoring for Scott and lawmakers to ease unemployment compensation taxes paid by businesses. The state’s high jobless numbers have forced businesses to pay steeper rates — with this year’s projected $72.10-per-worker levy triple that paid last year.
In addition to that assessment, another $9.51-per-worker is set to take effect in June, to cover interest on the almost $2 billion Florida has borrowed from the federal government to keep the state’s unemployment fund afloat.
“There’s no silver bullet, but really 10 or 12 things that businesses need to get Florida going again,” said Mark Wilson, president of the Florida Chamber of Commerce. “Lower taxes, insurance industry reforms, reducing the risk of lawsuits…but cutting unemployment compensation rates is one thing that would help businesses preserve jobs and get more people back to work.”
Barney Bishop, president of Associated Industries of Florida, said Scott also has to work toward diversifying the state’s economy. Former Gov. Jeb Bush, for example, took steps to foster bio-medical research in Florida, and several bio-tech clusters have been established in the state.
Bishop said maybe Scott can do something to bring more manufacturing into Florida, following the lead of such states as Alabama, Mississippi and South Carolina, which have successfully drawn automotive, aircraft and steel manufacturers.
“We have 14 seaports, but we’ve got to have some exports to go out of them,” Bishop said. “Exporting products brings distribution centers and more jobs. Especially in the Panhandle, we’ve got land. We just need incentives.”
With no ties to government-as-usual, Scott clearly prides himself on being willing to look differently at traditional programs. But his approaches contain risks both practical and political.
Scott advisers mangled research by former President Obama administration member Alan Krueger, a Princeton economist, in concluding that those receiving unemployment benefits spend an average of only 20 minutes a day looking for work — and that Scott should wean jobless workers from their already modest government checks.
Scott advisers recommended that after 12 weeks of unemployment compensation, unemployed Floridians should be required to perform “community work.” With jobs still scarce, the team also suggested that a state-subsidized employment program may be needed to stimulate job creation.
In a state with more than 1 million people out of work, many Floridians either have lost a job or know someone who has in the past three years. Scott hasn’t made clear yet whether he will support making the unemployed sing for their supper, but the governor does seem to be trying to take some of the sting out of the recommendation.
In his inaugural, Scott seemed to sense that he could be perceived as a political Mr. Burns, the evil boss on television’s “The Simpsons.” Instead, Scott recounted his own hardscrabble upbringing, which briefly included his family’s stay in public housing.
“For me, job creation is a mission,” Scott said. “My personal memories fortify my commitment to this mission.”
Even some of his sharper critics concede that Scott has his work cut out for him.
Bud Chiles, son of the late Democratic Gov. Lawton Chiles and, himself, briefly an independent candidate for governor last year, said Scott sought his advice on job-creating efforts.
Chiles said he was pleased to offer the counsel. With development and other business interests, Chiles said he hopes the Republican governor can help jump-start the state’s economy.
“It’s clear he’s got a lot on his shoulders,” Chiles said. “He knows what’s in front of him.”
Florida’s Business Rankings
1st – 2010 Top States for Business, CNBC
5th – State Business Tax Climate Index Rankings 2011, Tax Foundation
5th – Best Business Tax Climate 2010, Business Facilities magazine
6th – Small Business Survival Index 2010: Ranking the Policy Environment for Entrepreneurship Across the Nation, Small Business & Entrepreneurship Council
6th – Best State for Business 2010, Chief Executive magazine
7th – Best Business Climate 2010, Business Facilities magazine
14th – Best Business Climate 2010, Site Selection magazine
Where the jobs are — and aren’t
- The number of jobs in Florida was 7,204,700 in November 2010, up 36,200 jobs compared to November 2009, the fifth annual increase in jobs since the state started losing jobs in July 2007.
- The industry gaining the most jobs is private education and health services (+28,900 jobs, +2.7 percent). Other industries gaining jobs include: leisure and hospitality (+21,400 jobs, +2.4 percent); other services (+13,600 jobs, +4.4 percent); professional and business services (+10,100 jobs, +1.0 percent); and trade, transportation, and utilities (+5,900, +0.4 percent).
- The industries losing jobs over the year include: construction (-12,900 jobs, -3.6 percent), manufacturing (-9,200 jobs, -3.0 percent), financial activities (-8,100 jobs, -1.7 percent), total government (-7,900 jobs, -0.7 percent), and information (-5,500 jobs, -3.9 percent).
Source: Florida Agency for Workforce Innovation
Northwest Florida Legislative Delegation
Sen. Greg Evers, District 2 R-Crestview Committees: Criminal Justice, Chair; Transportation, Vice Chair; Budget Subcommittee on Criminal and Civil Justice Appropriations; Budget Subcommittee on Transportation, Tourism and Economic Development Appropriations; Communications, Energy and Public Utilities; Reapportionment; Rules Subcommittee on Ethics and Elections. (850) 689-0556 or (850) 487-5000
Sen. Don Gaetz, District 4 R-Destin Committees: Reapportionment, Chair; Budget Subcommittee on Transportation, Tourism and Economic Development Appropriations, Chair; Budget; Budget Subcommittee on Health and Human Services Appropriations; Commerce and Tourism; Health Regulation; Rules; Rules Subcommittee on Ethics and Elections; Joint Legislative Budget Commission. (850) 897-5747, 1-866-450-4366 or (850) 487-5009
Sen. Bill Montford, District 6 D-Tallahassee Committees: Budget Subcommittee on Education Pre-K-12 Appropriations, Vice Chair; Agriculture; Budget; Budget Subcommittee on Higher Education Appropriations; Commerce and Tourism; Education Pre-K-12; Governmental Oversight and Accountability; Reapportionment. (850) 487-5004
Sen. Charles S. “Charlie” Dean, Sr., District 3 R-Inverness Committees: Environmental Preservation and Conservation, Chair; Criminal Justice, Vice Chair; Budget Subcommittee on Transportation, Tourism and Economic Development Appropriations; Governmental Oversight and Accountability; Reapportionment; Regulated Industries. (352) 860-5175, 1-866-538-2831 or (850) 487-5017
Rep. Douglas Vaughn “Doug” Broxson, District 1 R-Tiger Point/Gulf Breeze Committees: Finance and Tax Committee; K-20 Competitiveness Subcommittee; Rulemaking & Regulation Subcommittee; Transportation & Economic Development Appropriations Subcommittee; Transportation & Highway Safety Subcommittee. (850) 916-5436 or (850) 488-8188
Rep. Clay Ingram, District 2 R-Pensacola Committees: Agriculture & Natural Resources Appropriations Subcommittee; Education Committee; Energy & Utilities Subcommittee; Insurance & Banking Subcommittee; K-20 Innovation Subcommittee. (850) 488-8278
Rep. Clay Ford, District 3 R-Gulf Breeze Committees: Energy & Utilities Subcommittee; Civil Justice Subcommittee; Higher Education Appropriations Subcommittee; Rules & Calendar Committee; State Affairs Committee. (850) 595-5550 or (850) 488-0895
Rep. Matt Gaetz, District 4 R-Fort Walton Beach Committees: Civil Justice Subcommittee; Government Operations Appropriations Subcommittee; Health & Human Services Quality Subcommittee; Judiciary Committee; Rulemaking & Regulation Subcommittee. (850) 833-9328 or (850) 488-1170
Rep. Brad Drake, District 5 R-Eucheeanna Committees: Transportation & Highway Safety Subcommittee; Select Committee on Water Policy; Economic Affairs Committee; Health & Human Services Access Subcommittee; Transportation & Economic Development Appropriations Subcommittee. (850) 892-8431 or (850) 488-4726
Rep. Jimmy Patronis, District 6 R-Panama City Committees: Government Operations Subcommittee; State Affairs Committee; Business & Consumer Affairs Subcommittee; Government Operations Appropriations Subcommittee; Rulemaking & Regulation Subcommittee; Rules & Calendar Committee. (850) 914-6300 or (850) 488-9696
Rep. Marti Coley, District 7 R-Marianna Committees: PreK-12 Appropriations Subcommittee; Appropriations Committee; Economic Development & Tourism Subcommittee; Education Committee; K-20 Competitiveness Subcommittee. (850) 718-0047 or (850) 488-2873
Rep. Alan B. Williams, District 8 D-Tallahassee Committees: Energy & Utilities Subcommittee, Democratic Ranking Member; Government Operations Subcommittee; Higher Education Appropriations Subcommittee; State Affairs Committee. (850) 488-1798
Rep. Michelle Rehwinkel Vasilinda, District 9 D-Tallahassee Committees: Agriculture & Natural Resources Subcommittee, Democratic Ranking Member; Agriculture & Natural Resources Appropriations Subcommittee; Energy & Utilities Subcommittee; Finance and Tax Committee. (850) 488-0965
Rep. Leonard L. Bembry, District 10 D-Greenville Committees: Agriculture & Natural Resources Appropriations Subcommittee, Democratic Ranking Member; Appropriations Committee; K-20 Innovation Subcommittee; Select Committee on Water Policy; State Affairs Committee. (850) 973-5630 or (850) 488-7870