Florida State Board of Administration Reviews Financial Oversight Improvement Options
Dec 8, 2009
The Florida Cabinet met today, December 8, 2009, during which it considered financial matters related to insurance. Following is a summary of those portions of the meeting proceedings. To view the complete meeting agenda, click here.
The SBA held its quarterly meeting as part of the Cabinet meeting, during which SBA Executive Director Ash Williams presented his agenda. All action items were approved without discussion.
The SBA quarterly investment updates were given, during which Mr. Williams reported on Florida Hurricane Catastrophe Fund (“FHCF”) investments, which have earned single digit returns. Although small, the returns are considered favorable and are above established benchmarks.
Florida Attorney General Bill McCollum asked about the FHCF portfolio composition. Mr. Williams explained that safety and liquidity are the primary focus points of the FHCF investments. He also stated that he is going to revise the SBA’s investment guidelines to further achieve these goals. The proposed guidelines then will be reviewed by the SBA Board of Trustees (“Board”).
An SBA Audit Committee’s recommendation for Florida’s pension fund to be externally audited advanced with approval from the Board to begin a competitive procurement process to select a firm.
Another motion was approved to obtain recommendations identifying any SBA mandated functions that may be eliminated.
FHCF Chief Operating Officer Dr. Jack Nicholson provided an update on FHCF bonding capacity, which is estimated at $11 billion. Based on this, total FHCF capacity is estimated at $19 billion. He noted that the FHCF is considering issuance of tax-exempt pre-event notes.
Dr. Nicholson also reported on 2004-2005 hurricane season losses, which are still adversely affecting the FHCF. Approval for assessment increases of $300-$600 million will be sought to provide coverage for those losses.
Mr. Williams updated the Board on improvements to the SBA’s financial risk management. Based on recommendations from an outside consulting firm, he discussed a suggested framework for continuing those improvements.
Next, Mr. Williams provided a brief SBA governance update. Florida Chief Financial Officer Alex Sink commented that fiduciary training should be implemented for the Board and SBA staff. Attorney General McCollum agreed with the need for training, particularly for staff members.
During public testimony on SBA governance, two speakers advocated the expansion of the SBA Board, including a representative from the Professional Firefighters Association.
Former Florida CFO Tom Gallagher spoke in opposition to expanding the SBA Board, saying that adding a Trustee would insert politics into a system that is respected nationwide. Mr. Gallagher also noted that a Constitutional amendment would be required to effectuate such changes.
CFO Sink moved that the SBA Board recommend to the Florida Legislature that the Board be expanded to include at least two others: a beneficiary and someone with investment expertise.
Attorney General McCollum remarked that there are alternatives that will accomplish the same goals and offered a substitute motion to expand the SBA Advisory Board. CFO Sink spoke in opposition to the Attorney General’s motion, which passed 2-1 with the CFO voting against it.
Following the vote, the Cabinet adjourned.
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