National Perspective : STATES’ FISCAL CRISES : Florida’s Governor Faces Tough Fight in Selling Budget Cure : Chiles wants to raise taxes to offset revenue shortfall--and seeks to impose financial pain now to gain benefits later.

Over the next few months, newly elected Florida Gov. Lawton Chiles hopes to see a lot more people like Fred and Santa Mann camped outside his front door.

On a recent morning here, the Manns sat behind a table in the state Capitol lobby, buttonholing legislators, staffers and whoever else passed by about budget cuts in a state hospital for the mentally ill where their son is a patient.

“What they are doing is cutting staff in order to have funds for food,” said Fred Mann, who had driven more than three hours to deliver his message. “But we’ve been told there is no money. Nobody wants to have more taxes, and yet everybody wants services.”

As the Legislature struggles to complete the 1991 state budget this week, Chiles hopes more stories like the Manns’ will break down Florida’s enormous resistance to new taxes. Chiles, the popular former Democratic senator who emerged from retirement to win a landslide victory last fall over Republican Bob Martinez, is pursuing a high-risk political strategy: imposing fiscal pain now in the hope of building support for new revenue later.

The budget woes in historically parsimonious Florida aren’t as severe as in such higher-spending states as New York and California. But that comparison offers little comfort here.

Revenue shortfalls in the current budget year have forced officials to cut almost $1 billion. The Legislature is agonizing over a $28-billion budget for fiscal 1991 that maintains all of those cuts and slashes nearly another $1 billion from state programs--at a time when surging population growth is swelling demands for services.

Even though the state ranks near the bottom on many measures of educational achievement and public health, the new budget is expected to cut per-student education spending--which will mean teacher layoffs, shortened school days and larger class sizes, educators say. It will fund no new prison construction and virtually eliminate spending on special local projects sponsored by individual legislators, such as community centers.

Although Chiles has apparently persuaded the Legislature to modestly expand services to pregnant women and young children, other programs serving the mentally ill, abused children and runaways will suffer.

“Our budget is inexcusable,” said Democratic State Sen. Kenneth C. Jenne of Ft. Lauderdale, chairman of the Finance and Taxation Committee.

Like most states, Florida’s acute problem is the recession that has flattened tax revenue. But it also suffers from a chronic fiscal imbalance that typifies the pressures crushing state budgets all across the country this year.

On one side of the pincer is rising costs. Through the 1980s, per capita state spending jumped nearly 55% after inflation, according to Florida TaxWatch, a local taxpayers’ organization.

Part of that increase reflects political decisions to spend more on education and some social services. But the key factors have been trends over which the state has little control: explosive growth in school enrollments, Medicaid costs and prison population.

“There is virtually no discretion left for the Legislature,” said Edward Montanaro, director of economic research at the Joint Legislative Management Committee.

The squeeze has been tightened by a rickety tax structure that doesn’t grow as fast as the economy--much less the demands on government. Measured as a percentage of personal income, Florida’s total tax burden remains one of the nation’s lowest. That’s largely because it is one of 10 states without a broad-based tax on personal income.

Unable to tap the state’s ample personal wealth (it ranks 17th in per capita income), officials are constantly scrounging for money. Florida changed its tax laws 84 times during the 1980s, a recent study for the state Chamber of Commerce found. This year legislators advanced such incongruous ideas as paying for indigent health care by raising auto license tag fees, and issuing a ceremonial Disney World license plate before settling on an increased tax on car rentals. But the funding plan fell into disarray Monday when a House committee refused to accept the rental tax hike, which was expected to raise $86 million.

“We are capped out on the sin taxes and the sales taxes, and we are politically capped out on the corporate taxes,” said House Speaker T. K. Wetherell, a Democrat from Daytona Beach. “After that we just scrap.”

Chiles says he intends to stop the annual foraging and build a tax structure that sustains state government over the long term. The top candidates are extending the sales tax to services or imposing a personal income tax--which is considered less likely because it would require a ballot referendum to amend the state Constitution.

Chiles decided not to begin that tax fight this year--not only to let pain sink in from the budget cuts, but also to pursue wide-ranging changes that he hopes will make the public more willing to invest in government. That agenda begins with ethics and campaign finance reform now pending in the Legislature.

But at the heart of Chiles’ strategy are exuberant if vague plans for fundamentally restructuring the way the state government operates. “We’ve got to blow it up,” he said. “We’ve got to change the whole system.”

Influenced by neo-liberal theorists such as author David Osborne, Chiles wants to attack the model of big centrally run government programs by shifting more control to the local level, seeking non-bureaucratic alternatives, and rewarding performance by tying spending to measurable results. A special commission is expected to report back with recommendations for implementing these ideas by Labor Day.

But the basic contours of Chiles’ plan are already apparent in a proposal he has pushed with State Education Commissioner Betty Castor to eliminate dozens of specific state-funded educational programs--such as efforts to bolster student writing and reduce kindergarten class sizes--and turn over the money to local school boards. If student performance does not improve, school districts could then face tighter state controls or even, if Chiles has his way, ultimately state takeovers.

These unorthodox ideas have induced a kind of ideological vertigo in the Legislature. The state House approved Chiles’ educational reform plan--but the Senate balked and now it appears likely the two houses will settle on a proposal to study and gradually implement the changes over the next three years.

Republicans generally like these ideas, which echo some of the “empowerment” themes White House reformers are advancing. But Democrats, who control both legislative houses, worry that local officials will waste the money, or divide it unfairly.

“The reason the state got involved in all of these issues is because the locals were not doing a helluva good job,” said Senate President Gwen Margolis, a Democrat from North Miami Beach.

Even if he passes his reforms, Chiles and his legislative allies face a tough fight to raise more money. The timing is difficult: Margolis wants to call a special session to raise taxes this fall. Chiles doesn’t think that gives him enough time to build a consensus and prefers to wait until next year. But Margolis and other leaders worry that legislators won’t vote for taxes in an election-year session already complicated by redistricting.

Some groups--including a major teachers’ union and the two leading business lobbies--are calling for new taxes to fund social investments. But no one underestimates anti-tax sentiment in a state crowded with retirees who fled bigger government elsewhere. When Martinez imposed a tax on services, a withering counterattack forced legislators to ignominiously repeal the levy months later. For every Fred Mann lamenting this year’s cuts, there is a voter who is “applauding what we are doing now” to restrain spending, said Ander Crenshaw, Senate GOP leader.

At bottom, Chiles is forcing Florida to debate whether it wants to be Alabama or California--whether it will remain a traditional Southern state that attracts industry with low taxes and weak government, or whether it will invigorate public investment to modernize its economic base.

Chiles knows which direction he prefers--but he recognizes how difficult it will be to obtain the revenue to get him there. “I only think I’ll have the opportunity to do it once in my Administration,” he said. “I don’t want to march up a hill that we’re going to have to march back down again. We’re going to wait until we get the people ready to go.”

Florida Profile Capital: Tallahassee Governor: Lawton Chiles, 61, Democrat Population (1990): 12,937,926 Key Industries: Services, trade, government, manufacturing, tourism Sales tax: 6% Income tax: none Governor’s proposed 1991 budget: $28.8 billion Shortfall estimate: $1.4 billion Per capita income, 1989: Florida $17,694 - U.S. average $16,490