2009 Fla. Legislative Preview

Florida Trend-February 1, 2009

By Amy Keller

Florida’s budget crisis and the economy will take center stage again when the Legislature convenes next month for its regular session. With an anticipated budget gap for 2009-10 of anywhere from $3.8 billion to $5.8 million and revenue forecasts continuing to shrink, the state is in for some extreme belt-tightening.

A signal of just how bad times are came from House Speaker Ray Sansom and Senate President Jeff Atwater at the annual GOP retreat last November. Sansom and Atwater warned fellow lawmakers not to even bother asking for funds for pet projects. Lawmakers have also indicated they won’t be taking up any legislation with a negative fiscal impact as they look for places to cut spending.

The cutting will be severe. “Sometimes, in bad times, you get rid of low-hanging fruit. That probably has been done. You’re getting into core stuff now,” former Gov. Bob Martinez – now senior policy adviser at Holland & Knight – said at the law firm’s 2009 Florida Legislative Preview in Tampa.

As Florida and the rest of the nation slog through the worst economic slowdown in recent years, GOP leaders say they will use this opportunity to streamline Florida government, cut bureaucratic red tape and make it easier to do business in Florida.

In a Dec. 16 memo to fellow lawmakers, Sansom said he would be directing the Economic Development and Community Affairs Policy Council and the General Government Policy Council to, among other things, “conduct a systematic examination of Florida’s regulatory structure and present substantial changes to streamline the way permitting processes are accomplished in Florida.”

In the Senate, Atwater has appointed Sen. Don Gaetz, a Republican from Niceville, to head the new Senate Select Committee on Florida’s Economy. The panel will examine ways to reduce redundant, non-essential regulatory activities that cost the government money and create obstacles for business. While the Florida Senate “can’t end an international recession,” Gaetz says it is well within its grasp to “put its thumb on the scale anywhere we can to make it more likely that sectors of Florida’s economy can come out the recession sooner and stronger.”

During a recent visit to the Department of Business and Professional Regulation, Gaetz learned from Secretary Charles Drago how difficult it is for a cosmetologist to open a beauty shop in Florida. “The application at the state level goes through 17 sets of hands – and that’s on top of local permitting, licensing and zoning,” says Gaetz. Back in his district, which stretches from Panama City to Pensacola, charter fishing boat operators must navigate a tangled maze of government regulation, Gaetz says.

Dominic Calabro, president and CEO of Florida TaxWatch, sees many areas where lawmakers can look to streamline. “It takes too long to get a road from concept to concrete. It takes far too long and it’s too expensive to permit good developments, quality developments, environmentally sensitive and responsible developments.”

Gaetz says the panel will hold a series of public forums around the state and establish a website for public comment to help determine “what we unconsciously or consciously have done at the local or state level” to discourage growth and development and business activity – and whether those regulations are necessary. Gaetz says that regulations put in place to save the Everglades would “probably be a disincentive we want to keep in place,” whereas a regulation created because of anti-competitive pressures would be one his committee would want to target.

Environmentalists and some local government officials are concerned that the Legislature, in its zeal to streamline, will loosen environmental protections.

The fertilizer industry, for instance, is expected to make another push to create a statewide fertilizer ordinance that would pre-empt local governments from adopting stricter measures. Cities such as Sarasota and Sanibel have enacted tough ordinances restricting the use of fertilizers by residents and businesses.

“A statewide fertilizer ordinance is fine, but not with a pre-emption clause,” says Sanibel Mayor Mick Denham, who spent much of last year’s session in Tallahassee helping defeat the bills. “Every part of Florida is very different in terms of its topology, the soils it has, the vegetation, and trying to have one bill that fits all of Florida really doesn’t work.”

Pre-emption will be a buzzword in Tallahassee again this year in other matters as well. Look for House bills targeting local stormwater fees, mining regulations and wetlands ordinances. For example, a handful of counties, such as Martin and Hillsborough, have wetlands regulations that go far beyond the state’s. Sansom has drawn a bead on such ordinances as overly bureaucratic during a time when all levels of government should be focused on economic recovery.

Environmentalists say they hope to pre-empt some of the pre-emption in Tallahassee. “Whenever the economy goes soft, polluters blame the environment, and we see proposals to roll back environmental regulations,” says Eric Draper with Audubon of Florida. “It’s an opportune time to do it because people are distracted. But the arguments are not true. There’s not really a trade-off between clean water and a prosperous economy – it’s not an either-or.”

Other Key Issues

 

» Property Insurance

Florida’s property insurance market will remain a priority, particularly the health of the hurricane catastrophe fund. The CAT fund’s ability to sell bonds to meet its reinsurance contracts has come into question, even after a $224-million deal with Warren Buffett’s Berkshire Hathaway in July guaranteeing the company will purchase up to $4 billion in bonds if a massive storm hits. In October, the Advisory Council to the Florida CAT fund warned that the fund would have been able to deliver less than half the $28 billion in reinsurance it sold to Citizens Property Insurance and private insurers during the 2008 storm season. The bond market has only tightened since then, says Tara Klimek, communications director for state CFO Alex Sink.

At the current exposure level of $28 billion, Floridians could face $1.8 billion in assessments each year for 30 years if a catastrophic storm strikes, Klimek says. In that light, Sink would like to see more risk shifted to the private market. Sink will also push for legislation that would allow the Florida Cabinet to adjust reinsurance prices and exposure levels to better manage risk.

Sam Miller, executive vice president of the Florida Insurance Council, says the state will have to allow Citizens and private insurers to charge higher rates if the state lowers the capacity of the CAT fund. “Citizens’ rates have to be allowed to get to some more realistic level. Everyone’s talking about a glide path – phasing increases over two to three years, and that’s the way we have to go,” says Miller.

The Citizens Property Insurance Mission Review Task Force is recommending that the Legislature end Citizens’ three-year rate freeze and allow it to hike rates to a more actuarially sound level in 2010. The task force says any annual increase should be capped at 10% on average statewide and no more than 15% for any given territory or 20% for any single policy. The panel also recommends that the Legislature bar Citizens from covering buildings in erosion-prone coastal areas and require incoming policyholders and their agents to certify that they can’t find coverage in the private market or that the only available coverage is more than 15% higher than Citizens.

» The Housing Crisis

Sen. Garrett Richter, a Naples banker who chairs the Banking and Insurance Committee, says state lawmakers will have to address Florida’s foreclosure crisis. “We’re going to have to have a debate surrounding how we can facilitate processes to make sure that abandoned properties don’t take down the economic value and safety,” says Richter. At the same time, he says, the state needs to find a way to help “bona fide homeowners” who come up against circumstances, such as a job loss or increased interest rates, which prevent them from making their mortgage payments. Those cases, he says, should be handled differently from property that has simply been abandoned.

» Workers’ Compensation

Business advocacy groups say workers’ comp rates could escalate following a 2008 Florida Supreme Court decision that struck down a cap on attorney fees in workers’ comp cases. The court concluded that claimant attorneys are entitled to “reasonable” fees in workers’ comp insurance cases, rather than a fee formula put in place in a 2003 package of reforms. While rates in Florida have fallen 60% following the 2003 reforms, the National Council of Compensation Insurance, which represents 200 workers’ comp insurers in the state, recently proposed an 18.6% rate hike that it says companies will need to cover the increased attorney fees associated with claims. Business groups say any increase in costs for workers’ comp insurance could prove disastrous for companies already reeling from the recession.

» Business Priorities

“The A-No. 1 issue we are asking the Legislature to do is to do no harm. Many of the agencies are looking at new rules. What businesses need is stability and predictability, and they need to know what they can count on from their government.” – Mark Wilson, president and CEO, Florida Chamber of Commerce

Other Chamber priorities include:

» Revision of the state’s workers’ compensation law

» A permanent fix to a glitch in corporate tax law that unintentionally deprives corporate income taxpayers of certain tax benefits, specifically depreciation deductions, they enjoyed prior to 2008

» Lowering the assessment cap on non-homesteaded property from 10% to between 3% and 5%

» Lowering the burden of proof required to challenge a property appraiser’s valuation of real estate

» Enacting a law requiring transparency in government spending

» Challenging the Department of Community Affairs’ proposed rules for the Rural Lands Stewardship Program. The chamber says the proposed rules, meant to create a comprehensive growth management policy for rural areas, require too much detail and employ a methodology that is too complex. The process will be so expensive and uncertain that communities won’t participate, the chamber claims.

» Gambling Compact

In 2007, Gov. Charlie Crist negotiated a 25-year compact with the Seminole Tribe of Florida to allow class III (Las Vegas-style) gaming, as permitted under federal gaming law, at seven of its Florida facilities. In return, Florida was slated to receive annual minimum payments of $100 million.

Last summer, responding to a suit brought by former House Speaker Marco Rubio, the Florida Supreme Court ruled that the governor did not have the authority to bind the state to a gaming compact that legalizes gaming that is illegal elsewhere in the state, thereby leaving it up to the Legislature to ratify a contract with the state.

As lawmakers and Crist begin work on another compact with the Seminoles, Florida racetrack owners are looking to get in on the action. The South Florida Gaming Coalition says the state could reap an estimated $500 million if legislators allow five tracks in Broward and Miami-Dade to operate blackjack tables and other Vegas-style games – and that the pari-mutuels need to be allowed to expand their gaming operations if they are to compete. Barry Richard, a Tallahassee attorney who represents the Seminoles, says his clients don’t want to put the pari-mutuels out of business but that the exclusivity is the only element of the compact that is advantageous to the tribe.

The House Select Committee on Seminole Indian Compact Review, chaired by Rep. Larry Cretul, is reviewing the issue and will produce a written report by opening day of the regular session with recommendations. Rep. Bill Galvano, vice chairman of the panel, will serve as a chief negotiator in the dealings.

In the other chamber, Sen. Dennis Jones, chairman of the Committee on Regulated Industries, says the Legislature should exercise caution in approving a 25-year compact with the Seminoles. “You’re sitting here with 18 million people. In 25 years this will be an entirely different state. To give them exclusivity will be awful and could leave the state holding the bag.”

» User Fees

As fiscally strapped towns, cities and counties get creative in their search for new revenue, some business groups are crying foul. At least four counties and nine cities, for instance, have begun billing drivers and their vehicle insurers for police and fire responses to auto accidents, no matter how routine or minor those accidents are. The Florida Insurance Council, which opposes such fees, says Florida residents already pay for those services through their taxes. It will ask the Legislature to ban municipalities from charging them. The council says such fees could also cause auto insurance rates to rise.

» Retail Priorities

The Florida Retail Federation will be pushing lawmakers to restore several tax-free sales holidays to try to stimulate the economy. “When you have selected items that are tax free, it creates a buzz about those items, but it also creates shopping for items that are not tax free,” says Rick McAllister, the federation’s president and CEO.

Other key items on the retail agenda include:

» Greater transparency in healthcare

» Creation of a dedicated funding source for Florida courts

» Revision of the state’s workers’ compensation law

» Creation of a sustainable market for alternative fuels and energy

Retailers in Broward County, meanwhile, were alarmed by a proposed county ordinance last year that would have required retailers to install and operate video surveillance systems in their parking lots. “We have been, over the last three to four years, very concerned about cities and counties transferring financial burdens from the budgets to users, and it is getting to the point now, because they too are getting unfunded mandates from the state level, that we feel the necessity to pre-empt local government from doing that,” says Rick McAllister, president and CEO of the Florida Retail Federation.