State Budget: Legislature Passes Bills to Address the State Budget Deficit; Governor Crist Might Veto Some Budget Cuts
On January 14, 2009, both houses of the Florida Legislature passed a series of 17 bills intended to remedy the deficit in the 2008 – 2009 state budget, which is currently estimated at $2.4 billion. The package also includes an economic development pilot project to provide small loans to certain businesses and legislation intended to reduce future budget shortfalls.
The highlights of the package include:
General revenue (recurring) budget reductions of $922 million.
Nonrecurring budget reductions of $57 million.
Sweeps of various trust fund balances in the amount of $487 million.
A transfer of $400 million from the Budget Stabilization Fund.
A transfer of $700 million from the Lawton Chiles Endowment.
Substantial revision of the prekindergarten through 12th grade public education funding program.
Increases in various fines and fees for traffic violations and expansion of the court's discretion to impose fines in certain criminal matters.
Creation of "economic gardening" pilot projects, to be administered by the Office of Tourism, Trade and Economic Development (OTTED) of the Executive Office of the Governor. One program will provide loans to eligible businesses, and the other program will provide market research and other technical assistance.
Adoption of requirements intended to reduce the long-term cost of state government, including review of all state contracts, a review of the means to maximize federal funding, and instructions for the Legislature's Office of Program Policy Analysis and Governmental Accountability (OPPAGA) to research four specific budget-reduction strategies.
In total, the bills provide an estimated $2.8 billion in savings and transfers, providing a "cushion" of approximately $400 million to cover the possibility that state revenues will continue to fall below official estimates.
Gov. Crist has until January 29, 2009 to sign some or all of the bills, veto them, allow them to become law without his signature, and to decide whether to use his line-item veto power to restore some of the funding cuts.
Based on Gov. Crist's public statements during the week, he is most likely to use the line-item veto power to undo education and public safety cuts, including cuts to a teacher merit-pay program. The existence of the $400-million cushion allows the governor to restore some of the funding that the Legislature cut without creating a budget shortfall. On January 14, 2009, Gov. Crist praised the Legislature's decision to create the $400-million cushion, stating, "The fact that they went the extra mile, as it were, does give us the opportunity to look at some things a little more closely and maybe show a little more compassion."
Taxes and Fees: New Revenue Sources Are Likely to Be Considered in the Upcoming Legislative Session
With the shortfall in the 2008 – 2009 state budget apparently resolved, and with the start of the 2009 regular legislative session only six weeks away, Florida legislators have begun considering ways to avoid massive shortfalls in the 2009 – 2010 budget.
An increase in the cigarette tax is likely to be considered. Increases of 50 cents to $1-per-pack have already been widely discussed.
Senate President Jeff Atwater (R-North Palm Beach) has created the Senate Select Committee on Florida's Economy and charged it with the task of, among other things, examining existing sales tax exemptions to determine which ones still make economic sense and which ones should be repealed.
In the House of Representatives, which is typically less friendly to tax increases than the Senate, Speaker Ray Sansom (R-Fort Walton Beach) has stated that some sales tax exemptions will be reviewed. Rep. Sansom said that he would consider repealing only the exemptions that could be eliminated without hurting businesses.
Politics: Florida CFO Alex Sink Will Seek Reelection, Not U.S. Senate Seat, in 2010
On January 16, 2009, Florida Chief Financial Officer (CFO) Alex Sink announced that she will run for reelection as CFO in 2010. CFO Sink had been considered a leading contender for the Democratic nomination for the U.S. Senate seat of retiring Republican Sen. Mel Martinez.
Earlier in the week,, U.S. Rep. Kendrick Meek (D-17th Congressional District) announced his candidacy for the Senate seat. Other potential Democratic candidates include state Sen. Dan Gelber (D-Miami Beach) and U.S. Reps. Allen Boyd (D-2nd Congressional District) and Ron Klein (D-22nd Congressional District).
On the Republican side, former Gov. Jeb Bush announced on January 6, 2009 that he would not run for the U.S. Senate in 2010. Several potential Republican candidates have been widely mentioned in the media but no Republican has formally entered the race thus far.
Property Insurance: Insurance Commissioner Issues Final Order Denying State Farm Florida's Requested Rate Increase
Florida Insurance Commissioner Kevin M. McCarty issued a final order denying State Farm Florida Insurance Company's (State Farm Florida) request for a statewide average 47.1 percent rate increase for homeowners' insurance on January 12, 2009. According to the company, it pays out $1.20 in claims and expenses for every dollar it collects in homeowners' insurance premiums. However, on August 25, 2008, the Office of Insurance Regulation issued its notice of intent to deny the rate filing, listing 23 alleged deficiencies in the filing.
State Farm Florida challenged the denial in a Division of Administrative Hearings proceeding. On December 12, 2008, Administrative Law Judge Daniel Manry issued a recommended order, finding that the filing should be rejected because the company failed to meet its burden of proof. The recommended order stated that "several issues of credibility or insufficiency prevent the fact finder from determining from a preponderance of the evidence that the indicated and requested rates are not excessive, inadequate, or unfairly discriminatory."
In approving the administrative law judge's recommended order, Insurance Commissioner McCarty said, "We strongly feel that this supportive decision will further help us in our endeavors to protect Florida consumers from unwarranted rate increases."
According to a State Farm Florida spokesperson, the company will continue its efforts to achieve what it describes as adequate rates and will do what it can to reverse the rejection of its rate filing. The spokesperson also indicated that the Florida property insurance market is a "rapidly deteriorating situation for us" and that the company may be forced to "take a really long look" at its role in Florida.
The State Farm companies had the largest share of the Florida homeowners' insurance market in 2007, with a combined market share of 21.3 percent, according to the A. M. Best Co. Citizens Property Insurance Corp. was second, with a market share of 20.5 percent.
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