December 29, 2011

An ill-advised toss of the dice

By Bob Graham, Special to the Times

Yogi Berra said “if you come to a fork in the road, take it.”

There are those who feel we can follow Yogi’s advice on the casinos proposal for Florida. We can have casinos and expand our economy beyond its traditional bases. But in my judgment, if we accept this siren call we are not taking the fork in the road; we will be selecting a path that will foreclose the far wiser one we have pursued for the past half-century.

A quick economic history of Florida:

In the 1880s Florida declined to participate in the Industrial Revolution, directly leading to an economy today that rests on a three-legged stool of agriculture, tourism and services.

Since 1960, those services have met the needs of the 3 million new Floridians who moved to the state each decade. Transformations including mosquito control, air conditioning, Social Security and other defined benefit retirement systems, the commercial jet airplane and Fidel Castro stimulated this growth.

During this period there was a growing recognition that Florida needed to add a fourth leg to its economy – ideally a high-tech, knowledge-based industry. The effort began paying off in the 1970s and 1980s, fueled by developments such as the Cape Kennedy space program; pharmaceuticals and electronics in South Florida; and military industries in Central and North Florida.

Florida had been one of the poorest states in the South. It was a signal achievement when in the 1980s, for the first time, Floridians exceeded the national average in per capita income, not once but in five years of the decade. Jobs increased annually more than 210,000.

Economic growth declined slightly during the 1990s and hit the wall in the middle of the last decade: From 2005 to 2010 the state lost almost 220,000 jobs. By the end of the decade, per capital income was 95.7 percent of the national average, about what it had been 35 years earlier.

I cite those statistics to illustrate that in 25 of the last 30 years the state had robust economic expansion. We should not be seduced into embracing casino gambling with its long-term economic and social consequences based on a five-year out-of-the-norm economic slump.

This is not a decision just for two South Florida counties. When parimutuel gambling was authorized in the midst of the Great Depression, it, too, was to be confined to a corner of the state. Today there are parimutuel facilities in every section of Florida. Already leaders in Lee, Duval, Orange and Pinellas counties are asserting that to be a competitive tourist destination, they must have casinos.

Let me ask a few questions:

Has anyone seen a substantial high-tech industry in Biloxi, Miss.; Atlantic City, N.J.; or Las Vegas? Would you like to be the CEO of a high-tech startup attempting to convince your board of directors that the place to locate was Las Vegas? The answer to all these questions is no.

Why is fairly obvious: Knowledge-based industry is attracted to places that offer a high quality of life for families, superior education, an ample workforce with a strong work ethic, and access to capital with a high risk tolerance. The ethic of high tech is incompatible with the “high roller success by chance” culture of a community that has bet its future on casinos. Like oil and water, they don’t mix.

Our success in the 1970s and ’80s shows it is realistic for Florida to aspire to diversify its economy through knowledge-based enterprises. But aspiration will not become reality just because casinos are rejected. Their rejection is necessary but not sufficient to achieve that goal.

What else is required? Florida can learn a lesson from one of its own: Jeff Bezos.

Bezos is the stepson of Miguel Bezos, a Cuban-American who came to the United States as an adolescent. While Jeff was a young teenager the family moved to Florida. He graduated from Miami Palmetto Senior High School in 1982, the same year in which he received a Silver Knight award for academic excellence. Four years later, Jeff graduated from Princeton with honors in electrical engineering. After about five years on Wall Street he decided to strike out on his own. In 1994 after surveying the country, Jeff Bezos decided to locate his startup in Seattle.

Thus, Amazon was born.

Why didn’t Bezos come home to Florida to start his knowledge-based company, which in 2010 employed 33,700 people? And almost 18 years later, what could we learn from him? Some of the reasons he settled in Seattle answer the question:

. A high quality of life. But doesn’t Florida have that also? Yes, but. The 2011 Legislature rolled back 40 years of bipartisan commitment to protecting one of the most blessed patches on Earth. It vacated decades of smart environmental and growth management policies.

. Education. In Seattle, Bezos found a well-trained workforce and institutions that would assure a consistent flow of talented people to meet expanding employment needs and would collaborate in research and development. How about Florida? In 2011, the Legislature accelerated a declining commitment to education, spending almost 10 percent less per student in public schools and transferring even more of the cost of higher education to students and their families.

. Available capital that encourages and fuels entrepreneurship. Most venture capitalists invest in firms within driving distance of their home to keep an eye on their investments. There is a symbiotic relationship between entrepreneurs and those with the risk capital to make them successful. The qualities which attract the latter, lure the former.

It doesn’t seem we have learned much from Jeff Bezos.

When the destructive casino proposal is behind us, these are the topics that should be the subject for serious thought and action. Gov. Rick Scott has indicated a willingness to reverse the damage which was done to Florida’s capacity to protect its environment and he has proposed a billion more dollars for the elementary-secondary school budget. He should add to those initiatives by convening Floridians to consider and recommend steps to achieve enhanced opportunity and prosperity for our people through knowledge industries.

And just maybe that next Jeff Bezos studying in a Florida school today will come home.

Bob Graham was Florida’s governor from 1979-1987 and represented the state as a U.S. senator from 1987-2005. His most recent book is Keys to the Kingdom.

April 3, 2011

St. Pete Times Op-Ed

http://www.tampabay.com/news/article1161109.ece

Florida – the sad state of our state
By Bob Graham, special to the Times

The Legislature has a responsibility to Floridians not to turn back decades of progressivism that made the Sunshine State a home, not a commodity.

As the Legislature enters its second half, there has emerged a disturbing pattern of ignoring many of Florida’s core values. Over the last half-century these values have given Florida government – whether in Republican or Democratic hands – a stability and predictability that is now threatened.

What are some of those at-risk values?

Florida is a treasure which we have the privilege of enjoying with the responsibility to preserve and enhance that treasure for future generations.

For most of Florida’s history, up until the mid 1960s, our state was treated like a commodity. If you didn’t like it you changed it: land into water; water into land. The business of the state was business, and our enormous natural resources were just another input. The quality and safety of our coasts, fresh waters, open lands and the Everglades were regularly and enthusiastically sacrificed on the altar of growth.

Riding over the horizon were two merging armies. Emerging Democratic leaders, such as Reubin Askew of Pensacola and Lawton Chiles of Lakeland, who were in the vanguard of the recently reapportioned Legislature, joined forces with young Republicans like Nathaniel Reed of Hobe Sound and Warren Henderson of Sarasota, who were appalled at the change they had seen in their newly adopted state.

These armies had a common mission: to reverse the damage commoditization had done to Florida and replace it with a culture of conservation and intergenerational responsibility.

The markers of success of the united armies of Florida are many.

Florida has one of America’s most esteemed state park systems. Our state has seen dramatic improvements in air and water quality. The Florida Everglades are now the American Everglades with Congress agreeing to partner with the state to preserve this unique treasure for our grandchildren’s grandchildren and beyond – a public-private partnership for quality development rather than lowest common denominator.

In the next month all of this will be threatened. The Florida Forever Act and its predecessor land-acquisition programs, which have saved almost 9.4 million acres of our most environmentally sensitive lands for the public is, after 44 years, being zeroed out of the budget. The proposed cuts to Everglades restoration are so deep it is doubtful the crucial goal of salvaging this world treasure and protecting the water supply for more than 6 million Floridians will be realized. If Florida walks out on Everglades restoration, Congress won’t be far behind. Comprehensive planning for future land and water use, which has elevated growth to a new standard of quality, is under all-out assault.

Florida is a dynamic state which requires vision to assure that future opportunities and needs are anticipated and met.

Since World War II that vision has largely been focused on understanding and responding to Florida’s incredible growth.

Florida was the least affected of America’s large population states by the Industrial Revolution. Our economy today – service, agriculture, tourism – is not much different than it was a century ago. What has substituted for traditional industry and has served as the fourth leg of our economic stool has been growth. Since the 1960s Florida has grown consistently by 3 million new residents each decade. It almost did so in the first decade of this new century but stagnant growth in the last years of that decade held it below the historic standard.

This is not a blip or statistical anomaly. There are several factors that have converged to slow growth, but three should particularly concern us. The current economic recession has shaken many Americans nearing retirement as to whether their defined contribution pension will support a move to Florida. Talk of major changes to Social Security and Medicare heightens that anxiety. Other states, especially in the Southeast, have emerged as stiff competitors for the attention of families at or near retirement. Fewer young families are choosing Florida as their home.

Now, new vision is required to prepare Florida for an era in which, yes, there will be growth, but it will be likely be at a reduced rate and reduced capacity to carry our economy.

So what do we do about it? Get serious about attracting the technology industries which are shaping and will shape the world’s future. This will require a dual strategy: a renewed commitment to the protection of our competitive edge – Florida’s environment – and building a world-class preschool through graduate school education system. The states which have benefited most by technology industries – such as North Carolina and Virginia – have done so not by selling themselves as the cheapest places to do business but rather as states that have built the infrastructure and the educational institutions which will most help businesses achieve sustained profitability.

In addition to a potential return to the Florida as a commodity policy of the early 20th century, this Legislature is on course to erase decades of investment and progress in education. Hopefully the Legislature will reject a proposal of a 10 percent per student cut in primary and secondary schools. Less likely is a change in the downward trajectory of support for higher education. Since 1990, in inflation-adjusted dollars, per student funding of the state university system from general revenue has dropped by about $4,000. These savage cuts to education expose a lack of vision for Florida’s future.

Florida aspires to fundamental fairness for all its citizens.

Traditionally Florida’s tax system was based on three principles: adequacy: sufficient revenue to support education and other services to the people; resilience: a stable revenue stream matched to needs so that the effects of business cycles are mitigated; and fairness: Floridians pay taxes according to their ability to do so.

These principles have been mangled by changes in the last decade, most of which were advanced as necessary for economic growth.

Since 1999 there has been a stream of tax reductions to make the state more attractive for investment. Absent these cuts, state revenue in 2011 would be $4 billion greater. This would have avoided the need for the deep cuts now being considered by the Legislature.

The stunning truth is that on virtually all fronts – the Legislature, the executive budget office, academics – there has been a failure to subject these cuts to the basic question: Did they work?

Without specific analysis we are left to answer that question based on data reflecting the impact these cuts had on jobs: How many jobs have been created and what did they contribute to the quality of life of working families?

The increase in jobs from 2000 to 2010, after the economic development stimulating tax cuts began taking effect, was 606,798. This increase was substantially less the in the two decades prior to the tax cuts: 1980-1990: 1,998,833; 1990-2000: 1,530,936.

Those statistics describe the quantity of jobs created before and after the tax cuts. In terms of take-home pay, what was the quality of those jobs? Florida first achieved a long-sought goal of exceeding the national average of per capita income in 1983 when Floridians earned 100.3 percent of the national average. State workers reached a peak in per capita income in 1987 at 101.7. By 2010 that relationship reversed and Floridians earned only 96.8 percent of the national average.

After 12 years of tax cuts, there is no evidence in these numbers that the cuts have achieved their purpose of accelerating quality jobs.

If that is the case, what have we done? All of the tax cuts, particularly the total repeal of the tax on stocks and bonds, primarily benefited the upper 5 percent of Floridians, thus contributing to the enormous disparity in wealth in the United States: The top 5 percent of Americans claim 63.5 percent of the nation’s wealth, while the lowest 80 percent get only 12.8 percent. In more recent years, Florida politicians have regressively shifted the cost of state services from the richest Floridians to those working hardest just to make ends meet. If the Legislature remains committed to adequacy, resilience and fairness as the foundation of our tax system, serious reconsideration should be given to these tax cuts and the harm they have done.

As a lifelong Florida Democrat, I consider myself to be a conservative man in my personal conduct and political philosophy. I believe in respecting traditions which have proven themselves in the real life of our state. I hope this Legislature will pause, reassess the consequences of its decisions on the future of Florida, reject extremist ideologies, and recommit to Florida’s heritage of commonsense values.

Bob Graham was governor from 1979-1987 and represented the state as a U.S. senator from 1987-2005.