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Issue 8: April 14, 2008
Topic 1: Budget Debate
Each chamber of the Florida Legislature passed its 2008-2009 Budget last week, with the Florida Senate passing a 65.9 billion budget by a vote of 26-12 on Wednesday, and the House passing a 65.1 billion budget by a vote of 72-41 on Thursday. Both budgets are more than $6 billion less than the budget signed by Governor Crist last year, so the stage is set for horse trading between the two chambers during the final weeks of the 2008 Legislative Session.
Both the House and Senate would decrease annual per-student funding. The Senate would increase property taxes to save education funding, while the House would instead use transportation funding. Both recommend increases in tuition rates at state colleges and universities.
The Senate would cut spending on certain medications, while the House reduced spending on hospitalization. The House cut hospice to avoid deeper cuts in other health care areas. Both chambers passed hundreds of millions in Medicaid cuts, which will decrease the operating budgets for many Florida hospitals.
Additionally, the House maintained its controversial cuts to restore Florida's Everglades. The House budget, thanks to a maneuver by House Democrats, also puts a one-year freeze on subsidies paid to help professional sports franchises, which will save $20 million.
Bottom Line: Florida's Constitution requires a balanced budget, so the two sides have only a matter of weeks to come together with a final product for the Governor's signature. Cuts to education and health care seem the hardest hitting; however, given the huge increases in funding education has seen in prior years, health care will actually see the most substantial budget cuts. The situation makes proposals by the Governor and Representative Bean to allow companies to compete to cover Florida's uninsured population, at no cost to the state, all the more appealing.
Topic 2: Property Tax Cap - 1.35 percent
A proposed constitutional amendment to cap yearly property tax growth at 1.35 percent of the property’s assessed value passed both House and Senate Committees last week. If the measure is passed by a three-fifths vote of the full membership in both chambers, Florida voters will make the final decision on the November ballot.
The 1.35 percent cap originally surfaced as a citizen referendum, proposed by House Speaker Marco Rubio and would apply not only to residential, but to rental, second homes, investment, and commercial properties.
If the amendment does not gain ballot access through the legislative process, the measure could resurface as a citizen initiative for the 2010 ballot, although to date supporters have collected less than one-third of the 611,000 signatures required for ballot access by referendum.
The 1.35 percent cap has been referred to as a sequel to Amendment 1, which passed well over the 60 percent threshold required to add an amendment to the state constitution. Over 400,000 Independents came out to vote on property tax relief in the closed Presidential Preference Primary Election on January 29, illustrating the importance of this issue to the electorate. If state leaders get behind the 1.35 percent cap in a fashion similar to their support for Amendment 1, look for similar results, given the historically high turnout in a Presidential Election.
Bottom Line: While legislators tend to vote in favor of tax relief, particularly in a case where the final say is left to the voters, Democrats will likely stand firm in opposition. Watch to see if the proposal makes it to the floor in the Senate.
Topic 3: Property Insurance Still Center Stage
The battle over homeowners insurance rates waged on last week in Tallahassee. Allstate Insurance Company, facing the enforcement of a suspension from writing new policies, turned over 150,000 pages of documents subpoenaed for a state investigation aimed at uncovering why the company's rates had not dropped following the insurance reforms passed in early 2007. The Senate stated this week that it may expand its investigation and require company officials to answer questions under oath in deposition.
Allstate currently faces four separate inquiries. The Office of Insurance Regulation is conducting the overall investigation into the company’s reasons for seeking rate increases following legislation passed by the state to provide cheaper reinsurance in exchange for cheaper rates. The Attorney General is in the process of an antitrust review. The Florida Senate is investigating the company's cancellation of coastal policies coupled with filings for rate increases of up to 42 percent. Finally, the Governor has assembled a team of outside counsel to monitor the progress of the ongoing investigations.
Meanwhile, the House of Representatives voted 109-6 on a measure that would take $250 million from state-run Citizens Property Insurance Corporation to provide loans to private insurers in an attempt to reduce rates by increasing competition among private insurers. The Governor opposes the measure.
A Senate proposal would decrease the obligation of Florida's Hurricane Catastrophe Fund. Insurers would be reimbursed for only 70 percent of their losses instead of the current allowance of up to 90 percent. The proposal also reduces the state's obligation from $28 billion to $25 billion.
Bottom Line: Allstate has until today (Monday) to apply for a rehearing to determine if the company has met its obligation in turning over documents required for the state investigation. The company's issues are playing out during the final weeks of a session where legislators are looking for any news to change the topic from budget cuts. Look for increased scrutiny by the legislature if Allstate is found to have not complied with the state's request.
Topic 4: Free Trade Agreement
Last week, the United States House of Representatives voted 224 to 195 to defer consideration of a Free Trade Agreement with Colombia. President Bush called the decision damaging to the economy, national security and relations with an important ally. The President also said the delay undermines the trust required for any administration to negotiate trade agreements in the future.
Governor Crist urged support of the Free Trade Agreement, stating that such an arrangement would create a fair and reciprocal relationship between the United States and Columbia. With two-way trade valued at nearly $5 billion in 2006, Columbia is Florida's seventh largest trading partner. Estimates predict that the agreement would increase exports to Columbia by $161 million, creating more than 1,700 jobs.
The House move worried South Florida's Columbian business community. Columbia currently holds favorable trade status, a level high enough to encourage investment, but not to solidify long-term business plans.
Bottom Line: Free trade is good for business and good for Florida. Columbia is an important ally for freedom in Latin American and for stability in the region. On pure trade terms, the treaty is expected to infuse more than a hundred million into the economy from increased trade and investment. Congress should reconsider.
Topic 5: Session Midway Point - Recap of Previous LeMieux Report Issues
Take Your Gun to Work – The Florida House and Senate passed legislation that would allow employees to bring their firearms to work, leaving them in their locked cars in their employer's parking lot. The vote was the product of a compromise that limited the gun owners who will be able to bring their gun to work to concealed weapon permit holders. The measure will be a significant change to Florida law that impacts not only Second Amendment rights but the rights of employers to govern their workplace. The Governor has until April 16th to act on the bill.
Recapture Rule Passes Committee – When the real estate market is booming, home values increase far above the three percent Save Our Homes cap and homeowners see substantial savings, but the recapture rule allows assessments to continue to increase three percent annually even when the market is flat or declining. Effectively, the rule allows property taxes to still increase at the three percent rate to "recapture" a portion of the difference between the homestead's taxable and appraised value. Last week a bill that would solve the problem passed through the House Government and Efficiency and Accountability Council with no debate and is now headed to the House Policy and Budget Council.
Taxpayer’s Bill of Rights – The Taxation and Budget Commission (TBRC) has delayed a vote on the Taxpayer's Bill of Rights (TABOR), a constitutional amendment that would limit government revenue to population growth plus inflation. The TABOR proposal, heavily supported by the business lobby, will be taken up this week, and if 17 of 25 members approve, the amendment would be placed directly on the ballot. Meanwhile, the House Government Efficiency and Accountability Council utilized another avenue, passing a bill that would also place the amendment on the ballot.
Bottom Line: Hold on to your hats, these measures will be acted on in the coming weeks and could significantly change the political, legal and economic landscape of Florida. Look for the Governor to sign the Preservation and Protection of the Right to Keep and Bear Arms in Motor Vehicles Act of 2008 and passage of the recapture fix before session ends on May 2nd. With the end of the line drawing near for the Taxation and Budget Reform Commission, it remains unclear whether the commission will gain the votes necessary to pass TABOR.
Question of the Week
Is Immigration and Customs Enforcement (ICE) raiding employers and even arresting executives and managers for immigration violations? What are the "best practices" in employee eligibility verification to protect a business?
Things to Watch
Fourteen Florida realtors concluded a trade mission to the United Kingdom aimed at establishing more effective referral relationships with British real estate agents. Thousands of British citizens buy property in the United States each year. The trade mission increased communications in the real estate market by establishing a commission sharing plan that will allow both American and British agents to capitalize on an untapped referral market at an ideal time. British purchases are likely to increase as Brits can utilize both the strength of their dollar and the ailing real estate market in Florida to invest in Florida real estate. Floridians will benefit from any movement in the real estate market, and the increase in tourism and therefore tax revenue, is likely to grow with more foreign citizens owning property in the Sunshine State. The realtors' trade mission lays the ground work for the Governor and Enterprise Florida who will take a trade mission to England in July.
University of South Florida President Judy Genshaft signed the American College & University Presidents Climate Commitment at Tampa's Getting Green by Going Green Expo. By signing the commitment, USF joins universities across the nation in a pledge to both neutralize greenhouse
gas emissions and increase research and educational efforts in the area of climate change mitigation. This commitment by higher education adds another element to the increasing awareness of climate change by government and business.
Last week the Florida Supreme Court heard a challenge on the constitutionality of a 2003 law limiting fees for workers' compensation attorneys to a percentage of the benefits. Under the new law, in cases with an injury, attorneys are entitled to 20 percent of the first $5,000 in benefits, 15 percent of the next $5,000 and 10 percent of the remaining benefits. The argument challenging the statute was grounded in due process claiming the reduced fee structure denies access to the courts in that attorneys cannot afford to take cases.
In a follow-up from last week's LeMieux Report, the family-owned Daytona Beach News Journal will be sold after losing an appeal. To prevent sale, the News Journal Corporation would have to buy out Cox Enterprises, an Atlanta base company that currently owns 47.5 percent of the News Journal.
