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Issue 10: April 28, 2008
***Special Budget Update*** The House and Senate Budget Conference concluded Sunday afternoon. The proposed budget cuts the pay of state legislators by 5 percent and includes $110 million in new fees. As expected, nursing homes will see a $164 million rate reduction next year, but an additional $55 million from the Lawton Chiles Endowment is allotted for health care and senior services. State colleges and universities would see a 6 percent tuition increase. The 2008 Budget, up for a full vote by both chambers this week, includes no new taxes and does not dip into Florida's rainy day fund. Watch this week for a special session ending LeMieux Report to give you the latest information on what's in and what's out of the 2008 Budget.
Topic 1: Constitutional Amendments per the TBRC
In its final meetings last week, Florida's constitutionally convened Taxation and Budget Reform Commission (TBRC) secured final passage of three highly debated proposals, including the tax tradeoff, state funding of religious organizations and a 65 percent education funding mandate, to be put before voters on the general election ballot this November.
As previously noted in the LeMieux Report, the tax tradeoff would cut an estimated twenty-five percent from property tax bills by eliminating the required local effort, a portion of property taxes currently allocated for education funding. The decrease of an estimated $9 billion in school funding would be balanced out through the legislature imposing at least a one cent sales tax increase, elimination of some of the 246 sales tax exemptions currently found in state law, and most likely further cuts to the state budget.
The TBRC also voted to allow Floridians to effectively overturn a 2006 Florida Supreme Court decision on education funding. TBRC members voted to add to the ballot a proposal to change a provision of the Florida Constitution relied upon to prohibit using taxpayer funding to support religious based institutions in the form of vouchers (publicly funded scholarships that allow parents to send their children to private schools).
The Commission also approved a measure to defeat the possibility of another constitutional objection to vouchers – the requirement for a "uniform efficient, safe secure, and high quality system of free public schools". The proposed amendment re-characterizes that duty as a "minimum," and not an exclusive duty of the state. The proposal was coupled with another initiative to require that 65 percent of all school district funding be spent directly in the classroom.
Proponents argued the measure ensures transparency and improves confidence in Florida's public education system. Historically, the average amount of school funding that ends up in the classroom is just shy of 60 percent. The devil is in the details as to what is defined as "classroom funding", and legislators, if the measure is adopted, will have to determine whether school nurses, guidance counselors and the like count toward the percentage requirement. Opponents of the measure, mainly the teachers union, threatened to challenge the measure in the courts as beyond the scope of the TBRC.
Four other proposed amendments to Florida's State Constitution will appear on the ballot, as proposed by the TBRC, including a provision to allow a local option sales tax for community colleges and property tax breaks for working waterfronts, conservation lands and property owners who improve energy efficiency and windstorm protection.
Bottom Line: The work of the 2008 TBRC is nearing completion. In a matter of weeks, funding for the powerful commission will end, the commission will present final recommendations to the Governor and the Legislature, and commissioners will relinquish their posts. Compared to the Constitutional Revision Commission which concluded its work ten years ago, the TBRC has been far more successful in putting significant measures before the people for their approval.
The real outcome however, will be seen in November when voters have the opportunity to have their say on each of the seven proposals. Watch to see if the tax tradeoff and voucher proposals can clear the recently enacted sixty percent high hurdle.
Topic 2: Inflation, It's Here
What do tortilla riots in Mexico, pasta riots in Italy, rice hoarding fears and gasoline pushing four dollars a gallon have in common? Rising energy prices. Consumers are being hit hard from the gas pump, to the grocery story, to the neighborhood restaurant.
The federal government reports that consumer prices are on the rise, posting substantial increases over the past fifteen months. For just the first three months of 2008, consumer prices increased at a seasonally adjusted annual rate (SAAR) of 3.1 percent. This compares with an increase of 4.1 percent for all of 2007. The index for energy, which rose 17.4 percent in 2007, advanced at a 8.6 percent SAAR in the first quarter of 2008. The food index rose at a 5.3 percent in just the first quarter of 2008, following a 4.9 percent increase in all of 2007. The index for grocery store food prices increased at a 5.9 percent annual rate, with a whopping 15.7 percent in the index for cereal and bakery products.
The effects of inflation are felt globally, with countries handling the problem in various ways. Fiji and Zimbabwe crack down on the hoarding of gold and foreign currency. The Philippines boost grain production to counter a rice shortage, while India is considering the regulation of steel production. These issues may seem oceans away from most Americans; however, you only have to look as far as your neighborhood warehouse supermarket to feel the impact.
The Wall Street Journal reported this week that Costo and Sam's Club began limiting the amount of rice an individual customer can purchase, but whether this cautionary move is solely attributed to expectations of an increase in price, or anticipation of the United States falling victim to the worldwide rice shortage, has yet to be determined.
The Journal also reported on the negative impact of rising food prices on the restaurant industry, currently the third-largest employer in the United States with over 13.1 million jobs. Squeezed by many of the same woes affecting other sectors of the economy, tightfisted consumers, and scarce credit and surging commodity prices, the industry is in its worst slump in decades. Many chains are scaling back expansion plans or cutting costs by skimping on things like extra sauce and free sour cream. Some are shuttering sites and laying off workers. Adding to the pressure is a big jump in the minimum wage starting this summer, which will boost wages by 12 percent in some states.
Skyrocketing petroleum prices have increased the demand for corn based ethanol, in turn increasing the price of corn and corn based food products, as well as other grain products where wheat crops, for example, are abandoned to replant corn. Rising fuel costs also add to food transportation costs, which increase prices at the supermarket and dinner table.
Bottom Line: Inflation is back and is impacting the economy in ways Americans have not seen since the late 1970s. A slowdown in the economy and rising unemployment, along with higher prices for fuel, food, and in Florida, taxes and insurance, are making it hard for Floridians to make ends meet. Inflationary pressures also hamper the Federal Reserve from a continued effort to lower interest rates to jump start the economy. Efforts taken in Florida to stimulate the economy through public works projects (e.g., transportation), as well as tax cuts like the property tax cut passed in January, will help put dollars back in the economy and hopefully initiate the recovery.
Topic 3: Be Sure Before You Sign
The 1st District Court of Appeals this week ruled unconstitutional the signature revocation law for petitions to amend the state constitution, noting that signature revocation is not referenced in the citizen-initiative provisions of Florida's Constitution.
The case in question deals with the Hometown Democracy ballot initiative, which was defeated earlier this year after failing to meet the number of signatures required to gain ballot access. Opponents of Hometown Democracy, including the Florida Chamber of Commerce and Associated Industries of Florida, challenged the proposal arguing that it would require voters to approve thousands of land-use decisions, effectively strangling development in Florida.
Recent changes in Florida statutes allow a petition signer to remove his or her name from a previously signed petition. The legislative change also allowed pro-business groups to organize a "revocation drive" to convince petition signers to reconsider their support.
The Hometown Democracy amendment ultimately fell thousands short of the 611,000 signers required for ballot access, due in no small part to the revocation drive run by the pro-business lobby. Supporters of the amendment in turn disputed the constitutionality of voters pulling their names off petitions.
Bottom Line: This dispute will likely go to the Supreme Court and the decision of the Court will have a major impact on whether future measures are put before the people to amend the constitution by petition.
Topic 4: Development Debated in the Florida House
Another initiative grounded in the debate over the Hometown Democracy ballot proposal should see a final vote before the end of session this week.
The House last week debated a development bill that changes regulations governing growth management to allow for more affordable housing. Debate over the legislation centered on an amendment that limits changes to long-term city and county development plans. The proposal would prohibit citizen initiatives to change comprehensive plans, but require neighborhood meetings before landowners can approach local governments to propose changes and also before cities or counties implement changes to the growth management plan. The Senate has not yet debated this portion of the legislation. The neighborhood meeting provision is offered as a compromise to the refer endum requirement that the Hometown Democracy proposal would mandate for virtually every land use change.
Bottom Line: While this year's growth management bill may prohibit citizen initiatives aimed at changing the growth management plans of local governments, we have not seen the end of the Hometown Democracy ballot initiative. No matter what happens over the next five days in Tallahassee, Hometown Democracy supporters will continue their efforts to gain ballot access for the 2010 ballot.
Topic 5: Democrat Delegates?
A date has been announced for the next round of debate on the seating of Florida's delegates at the Democrat National Convention this summer in Denver, Colorado.
The Democrat National Committee (DNC) stripped Florida of its delegates after the state moved its primary to January 29, one week ahead of the February 5th date set on the party's calendar. The move caused a battle between the state and national party that has lasted for months and involved multiple lawsuits.
While, DNC Chairman Howard Dean stated that Florida's delegates will play some role in the party's national convention this summer, on May 31, the DNC will determine if Florida's involvement in the convention will include actual participation in the selection of the Democrat nominee for president, in terms of casting votes towards the nominee, or an alternative role in order to maintain what some think a fitting punishment for voting ahead of schedule.
The fate of Michigan, whose voters also cast ballots ahead of schedule, will likewise be determined on May 31, though Senator Obama's name did not appear on the ballot there. While Senator Obama leads in pledged delegates, including primary votes cast in Florida and Michigan would give Senator Clinton a 122,000 lead in the popular vote. Not including those votes, gives Obama a lead of half a million votes. Senator Clinton defeated Senator Obama by 300,000 votes in Florida.
Bottom Line: Either way, the DNC's determination is likely to have a significant impact on the selection of the Democrat nominee for president, as many Democrat Superdelegates (a group of individuals not bound by the votes of their state delegations) remain uncommitted and are closely watching the actions of both Senators Clinton and Obama regarding the inclusion or exclusion of Florida's delegates.
Question of the Week
In this economic climate of rising inventory costs, I am concerned that my business will be caught short of cash if my customers do not pay me as quickly as I must pay my suppliers. Are there any legal tools I can use to improve my company's prospects of being paid timely?
Click here for the answer…
Things to Watch
Brew Blog – Your source for issues affecting beer
Just when you thought blogs were tools only utilized by political campaigns, check out the Wall Street Journal's article on the Miller Brewing Company's Brew Blog, a Web site that utilizes new media to scoop its major competitor, Anheuser-Busch. The site is authored by a full-time employee of Miller who calls industry sources, reads analyst reports and sifts through public records to uncover the beer industries' latest news before mainstream networks and publications get a hold of it. Through this information advantage, Miller has the first chance to respond to and critique the advances of its biggest competitor.
Business groups rally to oppose education change
Earlier this session, the LeMieux Report noted the Florida Council of 100's opposition to a proposal for a constitutional amendment to change the governance of Florida's higher education system. Last week the Florida Chamber joined the Council of 100 in voicing opposition to the proposal to limit the power of the Board of Governors in favor of an elected Commissioner of Education, already passed by the Florida Senate.
The Chamber notes that establishing the Governor as the state's primary education advocate, and working through an appointed, rather than elected Commissioner of Education, is essential to the new economy and part of a comprehensive platform aligning Florida's future economic aspirations with a well-designed talent development system. The Florida House has one week left to take up the measure.
Final vote on CSX commuter train for Orlando
A final decision on this session's major transportation bill is set for next week. The proposal to divert freight traffic from the Orlando Metro Area towards Polk County in favor of a commuter rail has passed through the necessary committees in the both the House and Senate and is set for a full vote in each chamber prior to the end of session this Friday. Among many facets, the final version must contain a provision for the state to assume liability for all accidents related to construction of the rail.
The Senate version of the bill also contains proposals to increase tolls collected on Florida's Turnpike by 25 percent and to lease parts of Alligator Alley, the portion of Interstate 75 that connects Southwest and Southeast Florida, to the Lawton Chiles Endowment, in hopes of stabilizing investment and interest income generated by the fund.
Businesses in the Green
Marking Earth Day last week, the Florida Department of Business and Professional Regulation launched its "Business in the Green," Web site, an educational resource aimed at helping Florida cultivate a more eco-friendly business community.
