Published: Feb 07, 2011 8:33 PM EST
Updated: Feb 07, 2011 5:33 PM EST

EUSTIS, Fla. (AP) - New Republican Gov. Rick Scott received wild applause from about 1,000 tea party activists when he said the $65.9 billion budget proposal he rolled out Monday would cut government waste and lower taxes.

Scott is proposing $5 billion in spending cuts in the next budget year beginning July 1 and another $2.6 billion more the following year.

At the tea party rally in a Baptist church, Scott compared his look at the current $70.4 billion budget to going up in an attic of an old home.

"Over the last three months I spent a lot of time in that attic and I'm cleaning it out," said Scott. "There's things that we need to dust off and repair and protect, and there's things we need to completely throw away."

Education would be hit with a $3.3 billion cut. Per-student spending, currently at $6,843.51, would be cut by $703, or 10 percent. Scott, though, is banking on savings from his proposed pension fund changes, if approved by the Legislature, and local school money freed up this year by a one-time federal infusion of non-stimulus cash, to trim that spending cut to $300 per student.

He proposes saving $1 billion on the state-federal Medicaid program for low-income and disabled people by reducing fees paid to doctors, hospitals and other providers by 5 percent. Growing enrollment, though, still would increase Medicaid spending by $2 billion for a $22 billion total.

Democrats said Scott is pursuing the same policies that got Florida into its present financial fix. State economists say revenues will fall $3.6 billion short of paying for high-priority to critical needs in the next budget year. House leaders also want to hold $1 billion in reserve, which would widen that gap to $4.6 billion.

"The retreaded voodoo economics we heard today will not right this ship," said Senate Democratic Leader Nan Rich of Weston. "But it will drill more holes in our already badly damaged public education."

Scott has proposed cutting pension benefits for state workers, teachers and some local government employees while making them contribute 5 percent of their salaries to their retirement plan. He also wants to cut the state's work force by 8,645 positions, or nearly 7 percent. About 2,000 of those positions already are vacant.

Scott also has recommended spending $800 million more on economic development and cutting $4.1 billion in fees and taxes as part of a two-year spending plan. His proposal includes a $1.4 billion cut in the state's corporate income tax that he eventually wants to phase out and an equal reduction in property taxes.

Businesses also would get a $630.8 million reduction in taxes they pay into the state's unemployment compensation program. Scott wants to roll back motor vehicle fees that lawmakers increase a couple years ago by $360 million.

He told the crowd he's going through every line of the budget and removing any item that isn't essential government spending.

"Government has to get back to its core functions, but only its core functions," he said.

In an unusual move, Scott broke with tradition by making his budget announcement outside of Tallahassee. Tea party activists from around the state came to the church and rallied ahead of Scott's speech. Outside there were "Don't Tread On Me" flags and inside the crowd sang patriotic songs and listened to speakers criticize President Barack Obama and government spending.

Scott used Twitter to explain his decision to come to this small central Florida town to roll out his budget.

"I do things different. The world does not revolve around Tallahassee...that's why I'm announcing my budget in the real world," he tweeted.

GOP-leaning tea party activists gave a more favorable response to his proposals than Scott expects to get in Tallahassee.

Leaders of the Republican-controlled Legislative earlier said they don't see how the cash-strapped state can afford tax cuts. They issued statements Monday that praised Scott for proposing spending cuts and not seeking tax increases without commenting on specifics.

"It's impressive that after one month on the job Gov. Scott has prepared a comprehensive budget so quickly," said Senate President Mike Haridopolos of Merritt Island. "The Senate is dedicated to working with the governor to provide a balanced budget with no new taxes."

House Speaker Dean Cannon of Winter Park said he chamber will thoroughly review Scott's plan.

No matter what the Legislature thinks of the proposal that calls for $65.9 billion the first year and $63.3 billion the second, Scott was wildly received in Eustis.

"We are so thankful that we have a governor that stands on his promises. He did not forget us," Billie Tucker of the First Coast Tea Party told the crowd. "He's one of us."

Scott's proposals also drew strong support from business interests.

"Cuts to education and health care will inevitably raise concerns among some, but in the midst of a recession, government must cut expenses because raising taxes is a death knell for job creation," said Barney Bishop, president and CEO of Associated Industries of Florida.

Scott has made job creation his mantra. He campaigned on a promise of making Florida friendlier to business cutting taxes, regulations and state spending in a drive to create 700,000 new jobs over seven years.

(Copyright 2011 by The Associated Press.  All Rights Reserved.)