Q&A of the Day – How responsible is Florida’s government at managing your money?
Each day I feature a listener question sent by one of these methods.
Today’s entry: Your report on state pension systems was eye opening last week. I find it alarming that Florida’s pension system is underfunded by 22% and that’s one of the best! I understand states taking a hit because of the pandemic but there still seems to be more to the story. Does Florida only rate high because other states are so poor at managing finances?
Bottom Line: To catch you up to speed in case you’re not familiar with this topic... Last week I presented the info that Florida’s public pension system is just over 78% funded, having been underfunded by 4% last year. Still, the average state’s pension was underfunded by more than 5% last year and Florida’s pension solvency currently ranks 13th best nationally. Now, about this question. In general, is Florida actually good with exercising fiscal responsibility or are we just among the least dysfunctional? It’s a good question as there’s a difference between truly being effective at managing one’s affairs as opposed to just not being as awful as those around you. First let’s start with how Florida compares in financial matters generally. Starting with how we’re taxed.
According to Florida Tax Watch’s 2020 annual report:
- Florida’s total tax burden is 20% below the national average, half of the burden of the highest tax state in the country – New York & 7th lowest overall
- 53% of tax revenue is derived at the local level (2nd highest nationally)
So, to your initial point. There’s no question Florida’s overall fiscal management is exceptional in comparison to other states. This includes the rare occurrence of the majority of taxation coming at the local level. In terms of efficiency, each layer of additional government acts as a middle man where overall efficiency is lost. This info suggests Florida’s the 2nd most efficient in the country in managing money. This is also backed up by US News & World Report & WalletHub which ranked Florida 2nd last year. Now to your point regarding whether we’re really effective or just less awful than other states?
It’s somewhat subjective but seems very reasonable to me. Based on type of service Florida’s overhead ranges from .01% to 1.4%. From there the only question is whether you agree with the programs funded by tax revenues. This is a case of I report and you decide. Consider this in context though. New York state has a smaller population than Florida and its government is literally more than twice the size of Florida’s!
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