Don’t cut state spending that turns a big profit and adds jobs
Written by Michael Lewis on February 14, 2017
A hammer blow to tourism and jobs last week won’t prove fatal but should stun us all, because it could cost Florida’s economy billions.
That 10 legislators could vote to stop funding Visit Florida, Enterprise Florida, the Office of Film & Entertainment, the Florida Small Business Development Center Network, Florida’s international offices and other economic programs is shocking.
Have these folks noticed that Florida is a tourist state? Or that a large percentage of their constituents earn livings from other businesses that these state agencies help grow?
Last Wednesday’s 10-5 House subcommittee vote was shocking. In a Thursday Appropriations Committee hearing, senators seemed incredulous that the House group had voted to kill the goose that lays Florida’s golden eggs.
The organizations slated for the guillotine, said Sen. Jack Latvala, “all produce a net increase in tax revenue over and above what we invest in them, and all five of those are included in a bill the House passed out of a committee yesterday to abolish.”
The Senate hearing was told those programs return up to $5.60 in taxes for each $1 the state invests. The Legislature’s top economic analyst said that to count as $1 of state tax return they must trigger $16.67 in spending. That means that these programs cause up to $93 in spending for every dollar the state invests.
Where could Florida use money more profitably than get 93-to-1 leverage and end up with more than five times the spending returning to the state budget while building tens of thousands of jobs? This is profitable investing we can’t afford to stop.
In fact, based on these numbers, the more the state spends on marketing our business the more it profits in growing tax collections that far outpace spending – and the more jobs Floridians hold.
Shut that marketing down and the economy would suffer. The Florida Chamber of Commerce estimates cutting this spending would increase – not reduce – state taxes on the rest of us by $89.1 million a year, because Florida households save an average of $1,535 a year as the visitor industry alone drives increased revenue to the state.
The state’s investments in jobs are already too small. Gov. Rick Scott this year budgeted only $85 million for Enterprise Florida – last year in vain he sought $250 million in job incentives alone for the agency – and $76 million for Visit Florida, down from $78 million.
Why the state would cut funding to build visitors and jobs when every dollar it spends brings in up to $5.60 to fund other needs is a question to ask those who are pushing to kill the golden goose. It’s hard to find more illogical action.
The principal argument to stop marketing to the world is that visitors and jobs will flow in anyway because we have sun, sand and surf and no income tax.
True, without marketing we’d still get most tourists and some companies would move in. But tourists and jobs that economic development efforts bring in would go elsewhere. If we lost only a small percentage of tourists or jobs to save marketing money we’d be far worse off.
First, the Legislature’s studies show a $3.20 return in taxes for every dollar spent marketing to visitors – and we had a record 106.6 million of them last year, with every 76 visitors supporting one tourism job. Visit Florida studies show that “if visitation decreased by as little as 2%, Florida would lose $2.2 billion in travel spending. $225 million in tax revenue and 28,000 jobs.”
State tourism investment totals only $76 million, and just a 2% loss for cutting off tourism marketing is probably a lowball. Why lose $225 million plus all those jobs to save $76 million?
Each industry involved, including filming, tells a similar story: funding of economic development repays Florida far more than it spends.
States that did end tourism funding lost big. Colorado did so 18 years ago and still hasn’t recovered. Pennsylvania in 2009 cut its tourism budget from $30 million to $7 million and lost more than $82 million in tax revenue. And it would be slow to get lost visitors back, because much of the globe can compete with sun, sand and surf.
While 10 legislators are sure the globe knows the Florida brand and would visit or start a business here regardless, that’s wishful thinking.
As Miami’s Bill Talbert, chairman of Visit Florida at a salary of zero dollars a year, points out, you’ve got to keep reminding them. After all, he notes, Coca-Cola keeps advertising and is hardly unknown. What does Coke know that these 10 legislators don’t get?
The kill-the-goose legislation is foolish on its face, considering that the goose keeps laying golden eggs of both jobs and tax revenues for a feeding cost far below profits the state derives.
While it’s unlikely that this bill will pass intact in the legislative session beginning March 7, we need to preserve every penny of profitable spending on economic marketing — in fact, add on. Remember, the more we spend to market the more the state and all of us profit in revenue and jobs.
So, how much visitor and business spending and how many jobs do legislators want us to lose in return for actually losing total state tax revenues that could help in education, transportation and elsewhere?
We all like win-win deals. But this one is purely lose-lose.