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Issue 3: March 10, 2008
The 2008 Legislative Session kicked off last Tuesday in Tallahassee with Governor Crist's State of the State Address before a joint session of the Florida Legislature. Click here to watch the speech.
Topic 1: Less Workers, Less Revenue
As expected, the first order of business in the 2008 Legislative Session required lawmakers to slash $500 million from the current year budget.
The vote to cut the budget divided primarily along party lines. While some legislators advocated using state reserves to fill the void, others cautioned against using non-recurring revenue to fund recurring expenses.
The majority of the cut, nearly $350 million, will come from education funding. Republicans argued the cuts were decreases in increased funding approved last year. The Florida Senate, looking toward the cuts to be made for the 08-09 budget, agreed to eliminate automatic increases that nursing homes, hospitals and other health care providers receive for indigent care.
Unemployment figures released last Friday by the Agency for Workforce Innovation showed that 7,300 workers lost their jobs in January, and total unemployment worsened a full percentage point from last year to 4.6 percent. Nationally, the largest payroll decline in five years caused the Wall Street Journal to declare on its Saturday front page headline that "Jobs Data Suggest U.S. in Recession."
While Florida's unemployment rate fairs better than the national average of 4.9 percent, state revenue, heavily dependent on sales tax revenue, declines when 423,000 Floridians are out of work.
Bottom Line: Revised revenue estimates for 2008-2009 will be released this week. While some in the Legislature predict a decline in revenue that will require an extra 2.5 billion dollars in cuts, expect it to be worse and the cuts, or dependence on reserves, to increase.
Topic 2: Bored of the Board of Governors?
The Florida House and Senate debated a proposal to eliminate the Florida Board of Governors in favor of an elected Education Commissioner, who would assume responsibility for all levels of public education, including the state university system.
Currently, the Florida Board of Governors oversees the state university system. The 17 member panel was created by a constitutional amendment in 2002, members are appointed by the Governor. The question of whether the Florida Legislature or the Board of Governors holds the authority to set tuition rates remains unanswered and is currently being litigated before the courts. Under the new proposal, the legislature would control the budget for Florida's eleven public universities.
Former Governors Bush and Graham have expressed concern over the proposal, which would require approval by two-thirds in both chambers and sixty percent voter approval on the November ballot. Governor Crist is sympathetic to an elected education commissioner, having served in that role as the last elected commissioner from 2000 to 2002, but has not fully weighed in on the proposal.
Bottom Line: Education in Florida is a tale of two systems. Kindergarten through 12th Grade education works well with accountability and rising student achievement. As for higher education, there is no system in Florida; each university competes with the other with territorial expansion well beyond their main campuses.
Worse still, each university takes a supermarket approach to curriculum offerings, instead of specializing in the pursuit of excellence. Florida is badly outstripped by better run, better managed, and better organized systems in states like North Carolina and California. Florida should fix what is broken by focusing on placing real authority in a chancellor/commissioner or governing body to oversee higher education.
Topic 3: HOPE for Homeowners Facing Foreclosure
The number of home foreclosures rose to an all-time high in the final months of 2007, prompting action at both the federal and state levels to address the issue, as well as its correlating effects on the overall economy.
Florida represents a disproportionate percentage of the nation's homes under foreclosure and has six of the top twenty-five American cities with the highest foreclosures rates (Miami, Ft. Lauderdale, Orlando, Palm Beach, Tampa, Sarasota). Nationwide, there are currently a record one million homes in foreclosure, and nearly three million homeowners were behind on their payments at the end of last year.
Federal Reserve Chairman Ben Bernanke visited Orlando this past week to make assurances that the federal government is actively engaged in a comprehensive remedy, including working with lenders to reduce loan amounts and restore homeowner equity, currently at its lowest percentage since World War II.
As part of the federal initiative, Florida received 1.3 million in funding from the National Foreclosure Mitigation Counseling Program. The funding will enable 50 organizations to offer foreclosure counseling and coincides with the work of Governor Crist's Home Ownership Promotes the Economy (HOPE) Task Force, created last month to address the foreclosure rate. Chaired by Lt. Governor Kottkamp and comprised of experts in the mortgage and banking industries, the group held its first meeting this week in Tallahassee and will work to present recommendations to the Governor by April 18.
Bottom Line: Federal and state officials are reacting well to help homeowners, underwater in their homes, avoid foreclosure. Tax cuts, refunds, higher FHA loan amounts, and aggressive programs to reduce loan payments by banks may keep Florida from falling into even more challenging economic times.
Topic 4: Tax Change Exchange
Last week, the LeMieux Report noted a proposal by the Taxation and Budget Reform Commission (TBRC) to cut an estimated 25 percent from property tax bills. The proposal eliminates a portion of property taxes currently allocated for local school funding, replaces that funding with a one cent sales tax increase, and requires the legislature to eliminate sales tax exemptions, further cut the budget, or do both.
This week, the Governmental Procedures and Structure Committee of the TBRC unanimously voted in favor of another extensive tax cut, this time calling for a 25 percent "super" exemption for all residential property, including second homes and rental properties. This new proposal is similar to last week's tax trade off in that both include a five percent tax cap on all property; however, this week's more modest proposal makes up the difference in revenue through an equally more modest half cent sales tax increase for the first three years.
By a narrower margin, the commission also passed a recommendation that the Florida Legislature create a committee to review nearly 250 sales tax exemptions and also a separate proposal for a constitutional amendment to cap increases in government revenue to inflation and population growth.
Bottom Line: It remains to be seen whether the TBRC will put forth any meaningful reform measures for the November ballot. Seventeen votes for approval is a high hurdle, especially when it is difficult to turn out the full board.
Topic 5: Growth Management vs. Hometown Democracy
Earlier this year, the Hometown Democracy ballot initiative was defeated after failing to meet the number of signatures required to gain ballot access. Opponents of Hometown Democracy, including the Florida Chamber of Commerce, argue that this movement would require voters to approve thousands of land-use decisions, effectively strangling development in Florida.
This legislative session, Secretary Tom Pelham of the Florida Department of Community Affairs (DCA) proposed a "Citizens Bill of Rights" that, in an attempt to increase local involvement and input in land-use decisions, would reduce the number of times local governments can petition the state for land use changes and would eliminate last minute changes to such proposals.
During the first week of the legislative session, DCA also unveiled an online planning toolbox designed to provide more local communities with information and ideas to increase public involvement in the planning process in a realistic and manageable manner. The Department of Community Affairs has recently rejected proposals for several projects in multiple land use classifications, including proposals to build outside Miami-Dade's urban development boundary.
Bottom Line: Even in a slowing economy, tensions over development in Florida will increase in the coming years. Petitions for the Hometown Democracy ballot initiative are valid until 2010 and opponents of the measure are retooling for another fight to keep the measure off the ballot.
Question of the Week
"Are there any legal restrictions on an insurer's ability to increase homeowner policy premiums? What about canceling homeowner policies?"
Click here for the answer...
Things to Watch
Enterprise Florida this week announced an upcoming trade mission to Mexico. Florida export sales to Mexico exceeded $3 billion in 2007, representing a 34 percent increase over 2006, in the third largest market for goods made in Florida.
Tampa Bay's first free-standing emergency room opened. A similar center in Miami Beach opened in January and several others are planned across the state.
CFO Alex Sink wants a lawsuit brought against the investment advisors who sold the state's Local Government Investment Pool shaky mortgage backed security investments. Sink released a 10-point plan to deal with the issues that caused a run last fall on the Local Government Investment Pool, and point one is an evaluation of whether the state can sue.
Senator Mike Fasano and Representative Sandy Adams are pushing for middle of the road immigration reform with a measure requiring businesses seeking state contracts to use the federal E-Verify system to check the immigration status of new hires.
Measures passed by states to promote the use of renewable energy, are spurring significant investment and quickening the pace of development.
Florida currently has the 46th lowest cigarette tax in the United States. Look for an up to $1 per pack tax increase proposal, aimed at helping offset Florida’s budget shortfall.
Budget woes will increase debate on Florida’s Class Size Amendment. Look for a House proposal to revamp the amendment by allotting more time for schools to meet the 22 student cap.
China and India are currently exempt from a global pact addressing climate change. President Bush expressed his desire for global unity in addressing the issue and stated that the United States will refuse to ratify a green energy pact unless all major countries are in agreement. Current protocols give China and India a pass from stringent climate change restrictions as "developing nations."
Time Magazine provides an insightful narrative on how John McCain became the Republican Nominee.
