Florida is being forced to send millions of dollars peeled off the top of its vendor contracts to Washington beginning in 2012 -- a federal "cash grab" some state lawmakers are questioning because the funds are earmaked to support the goverment's ongoing stimulus prorgam.
What's more, the state will have to hire workers and purchase new technoloy to handle the collecton of the federal 3 percent "witholding" on each contract of $10,000 or more, lawmakers were told Thursday.
"This is a cash grab by the feds and many corporations that receive these contracts are going to realize that 3 percent decrease (in the amount the state pays to puchase goods and services) and they will want to file for tax refunds" to get back that 3 percent, said Rep. D. Alan Hays, R-Umitilla, who chairs the House Gvernmental Operations and Appropriations Committee.
The state pays private companies to provide such things as prison management, restaurant operation and computer system maintenance, as well as to provide supplies, from mops to paperclips.
Hays said Thursday that to send millions of dollars to Washington earmarked for return to states as stimulus money makes no sense when Florida is facing a $3.2 billion dollar shortfall. The practice could needlessly inflate state contracts, he said, and in instances when it does not increase a contract's amount the extra money still should not be going to the federal government.
"We're trying to encourage the vendors to lower their prices to just marginally profitable and then we're going to take three percent of that?" Hays said. "What you're doing is inflating everything by three percent across the board."
The Obama adminsitartion last year incorprated the rule into the American Recovery and Reinvestment Act, according to officials with the Department of Financial Services (DFS). The act requires three percent of any vendor contract of more than $10,000 signed by the State of Florida be sent to Washington.
The collection of funds would go into effect January 1, 2012 and would cost vendors millions, according to DFS. There were 166,196 payments of more than $10,000 to 19,113 businesses in fiscal year 2008-09.
Hays said the federal governenment "needs to live within its means and let businesses get on with making money instead of throwing a wet blanket on the business community."
He encouraged his colleagues to write to their representatives in Washington to repeal the stimulus act. Many state Republicans have spoken out against Florida's acceptance of stimulus money. Yet, there is $6 billion in stimulus money included in this year's state budget.
