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Issue 15: June 2, 2008
Topic 1: Democrat Delegate Decision
The long-awaited verdict in a highly controversial case over whether or not the 1.7 million Florida Democrats who cast ballots in the January 29th Presidential Preference Primary will receive representation at the Party's Denver Convention this summer was finally resolved on Saturday.
The Rules and Bylaws Committee of the Democratic National Committee (DNC) met in Washington, DC, and voted unanimously on a proposal by Congressman Robert Wexler, of Florida's Nineteenth Congressional District. Wexler was an early supporter of Senator Barack Obama in the race for the Democrat nomination and serves as one of 26 Florida Democrat Superdelegates, a group that may very well decide the Democrat nomination.
Under the new plan, Senator Hillary Clinton will receive 52.5 delegates from Florida, Senator Obama, 33.5 delegates and Senator John Edwards, 6.5 delegates. All delegates will be seated, but each will cast only one-half of a vote. Florida's Superdelegates will also each receive only one-half of a vote.
Bottom Line: The DNC's Rules and Bylaws Committee may have made its decision, but the battle over the Democrat nominee is not over. Depending on the results of the few remaining primaries, look for Senator Clinton to challenge the ruling all the way to the Denver Convention, particularly if she carries the popular vote. Additionally, look for more lawsuits that allege a violation of constitutional rights for failure to count all of Florida's delegate votes. No matter the outcome, the 2008 Presidential Primary Season will undoubtedly garner a reexamination of the underlying legal and policy issues surrounding primary elections.
Topic 2: TaxWatch's Turkeys
Governor Crist was delivered Florida's 2008-2009 budget last Friday, starting a 15 day period during which the Governor and his staff will review the $66.2 billion budget and determine where the Governor will utilize his line-item veto power.
In anticipation of the final product, Florida TaxWatch, a non-profit, non-partisan taxing and spending watchdog organization with a twenty-five year history, issued its 2008 Florida TaxWatch Turkey Watch Report. The report isolates 133 items equaling $110.5 million in budget turkeys, a term that refers to member projects or other budget items that have not been fully vetted through the legislative process. For example, turkeys include projects not recommended by the Governor's Office or a state agency, projects added in budget conference, and those that have not had the benefit of public review.
Member projects such as hometown water and school construction projects, as well as hidden dollars for state universities, make up a large part of the turkey list.
TaxWatch noted that instead of funding $110 million in budget turkeys, the Legislature could have reinstated the popular Back to School Sales Tax Holiday – $23.4 million, or the Hurricane Preparedness Sales Tax Holiday – $12.3 million, neither of which were provided in this year's budget. Additionally, TaxWatch noted that every $1 million in turkeys can provide 18 additional teachers with average salary and benefits of $55,000.
This year's budget includes the second smallest amount allocated for turkeys in over twenty years. Last year, Governor Crist vetoed $267.3 million in turkeys identified by Florida TaxWatch. These vetoes were needed to help offset the decline in budget revenues.
Bottom Line: The line item veto is a powerful tool utilized by governors in many states to instill fiscal discipline on the Legislature. The federal system would do well to adopt the same model and give the President the ability to keep congressional spending in check.
Topic 3: New Residents Challenge Save Our Homes
Lawyers representing citizens from Leon, Palm Beach and Charlotte counties challenged Florida's "Save Our Homes" tax cap and the expansion of that cap under Amendment 1 in a suit filed in Leon County. Circuit Judge Charles Francis heard the first arguments last week in a case to determine the constitutionally of the provision.
The group of new Florida residents argued that the three percent annual tax cap violates their rights under the federal constitution to travel and to equal protection, on the grounds that new residents could pay much higher taxes for a home next door to a longtime Florida resident who is protected by the tax cap.
In 1992, the same year Florida voters first approved Save Our Homes, the United States Supreme Court ruled in a California tax cap case challenging Proposition Thirteen, that states have the discretion to set these types of tax policies regardless of their affect on new residents, even where new homeowners pay more. Attorneys for the challengers claim that Florida's property tax scheme creates "second class citizens" where new residents pay substantially more than homeowners who enjoy the benefit of the tax cap.
Bottom Line: Both Save Our Homes and the portability provision passed by voters on January 29th are constitutional. Newcomers to the state are not discriminated against as a class based upon their prior out-of-state residency. Rather, new residents to Florida are treated the same as Floridians seeking their first home. For this reason, there is no preference for residents over non-residents, only a preference for homeownership over renting or commercial ownership. That preference does not violate the federal constitution.
Topic 4: Global Warming Report
The Florida Coastal and Ocean Coalition, a group of environmental, civic, business and outdoor organizations from across the state, released a report last week entitled, "Preparing for Sea Change in Florida," in which the coalition outlines a strategy to cope with the impacts of global warming in the Sunshine State.
The coalition notes that Florida should adopt a more stringent CO2 emission reduction goal in order to achieve an 80 percent reduction by 2050, and that the state should discourage continued development along Florida's coasts by reducing state funding, tax breaks and other incentives that lead to development in coastal areas. The report advocates that the Department of Environmental Protection upgrade stormwater regulations, by taking into account the likelihood of frequent heavy rainfall. The report also recommends Florida require local coastal governments to consider sea level rise when amending their land use plans. Finally, the report notes the likelihood of increasing levels of acidity in Florida's ocean water, due to sea levels rising, and discusses the possibly devastating effect of this change in water chemistry on coral reefs (a source of tourism) as well as the seafood industry.
In an article discussing the report, the Associated Press notes that Florida could lose up to $327 billion (or five times the state budget) by 2100, due to real estate damages and lost tourism revenue caused by global warming.
The report praises Governor Crist's leadership in addressing the effect of climate change on Florida's future and his dedication to keeping Florida at the forefront of the green technology movement. Just this week, Governor Crist joined Progress Energy to unveil plans for Sustainable Electrical Energy Delivery Systems (SEEDS) technology to be evaluated at the University of South Florida and Albert Whitted Park in St. Petersburg. The technology combines photovoltaic panels and an advanced battery system to provide renewable energy during peak demand times.
Bottom Line: The movement to address climate change is here to stay, and Governor Crist has drastically expanded the state's involvement in this movement, opening up the opportunity for businesses to capitalize on a market ripe for development of alternative and renewable energies. Look for the Governor to announce new initiatives at the second annual Serve to Preserve Summit later this month to continue Florida's leadership role on this issue.
Topic 5: New Insurance Law
Last week Governor Crist signed major insurance reform legislation passed during the 2008 Legislative Session. The bill holds insurance companies more accountable and increases consumer protection in an effort to build on the insurance reforms passed during the 2007 special session that have led to rate decreases of more than 15 percent statewide.
The legislation signed last week extends both the rate freeze on Citizens Property Insurance, Florida's state-run insurance company, through January 2010, and the provision that requires companies to file for rate increases with the Office of Insurance Regulation before implementation, among other reforms.
Governor Crist did not sign one facet of this session's insurance reform package, a provision designed to take $250 million from Citizens for payment of claims to instead fund the Insurance Capital Build-Up Incentive Program to attract start-up and newer insurance firms. In his transmittal letter to the Secretary of State, the Governor acknowledged that the program was commendable, having removed 200,000 polices from Citizens and kept an additional 480,000 from becoming Citizens' policyholders. However, the Governor expressed concern over using Citizens reserves to fund the project.
Bottom Line: Floridians suffering from challenging economic times, high property taxes and property insurance still need the Citizens rate freeze to make ends meet. With few storms in the last two years, reinsurance has become less expensive and the state is right to pursue it for both Citizens and the CAT Fund. When the economy recovers and property taxes decline, due to Amendment 1 and the decline in property values, Florida will be ready to turn more of the insurance market back over to the private sector.
Question of the Week:
Stories about runaway jury verdicts seem to be in the headlines all the time, and I am concerned about my business. How can I minimize my risk?
Click here for the answer.
Things to Watch:
Cover Florida
The Wall Street Journal weighed in this week with rare praise of a state government policy: "When prices rise because of mandates, the less affluent are often forced to make an all-or-nothing choice between 'Cadillac coverage,' which involves just about everything, or going uninsured... Governor Crist is to be credited for removing this artificial, regressive floor on plans. It's a simple matter of equity...The Florida success also shows the political benefits when Republicans talk seriously about health care. Mr. Crist has made increasing consumer choice a signature issue. When Mr. McCain talked up his health care reforms earlier this spring, he did so in Tampa. He chose the right state."
Piper Aircraft Expansion
Piper Aircraft will expand operations in Vero Beach through a $32 million incentive package and a public private partnership between the corporation, state and county. The project is expected to create 454 jobs by 2012, and generate hundreds of millions of dollars in wages and economic development for Indian River County.
Everglades Restoration Lawsuit
Mediation will begin this week in a dispute between the Army Corps of Engineers and the South Florida Water Management District, and the Natural Resources Defense Council (NRDC) over the Everglades Agricultural Area Reservoir. The NRDC filed suit over the use of the water in the 26-square-mile reservoir. The NRDC wants the water to be used primarily for the Everglades Restoration Project and fears without mandating this use, the project could be used to aid area industries.
Florida Housing Market
Click here to read the Wall Street Journal's take on the ups and downs of Florida's Housing Market.
Hauser's Law
The Wall Street Journal goes beyond the political rhetoric for a purely economic-based look at the federal tax system. Economist Kurt Hauser's research reveals that regardless of marginal tax rates, tax revenues consistently remain near twenty percent of the nation's gross domestic product (GDP). He determines that tax revenue is linked to GDP rather than the tax rate. Accordingly, raising the tax rate reduces GDP as workers are more likely to hide and underreport income, while lowering the tax rate encourages productivity and investment.
