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Business Observer Friday, May 14, 2010 10 years ago

No Harm Done

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Despite a contentious final week made more distracting by the oil leak crisis, the Legislature passed a no-new-taxes budget and pro-business bills, but a doubled deficit projected for next year with all new state leadership poses bigger challenges ahead.
by: Jay Brady Government Editor

REVIEW SUMMARY
What. Florida Legislature finished on time, but will get called back.
Issue. Will economic incentives pay off fast enough to plug next year's projected $6 billion deficit, and will the governor veto the budget or call for a special session?
Impact. The Legislature didn't raise taxes, but business incentive tax breaks ultimately come from taxpayers.

For a legislative session that included a failed bill to hike up droopy drawers, and one banning bongs, snakes and lizards that passed, the Legislature managed to keep some focus on business issues.

A deep recession will do that.

Legislators didn't hike taxes and they provided $242 million in film tax credits against corporate income taxes and sales taxes. The tax credits replace the current cash refund incentive program always at the mercy of uncertain annual legislative budgets.

Manufacturers also got favorable treatment with a refund of up to $50,000 per business for sales taxes on equipment purchases. It's a race for handouts plan designed as a first-come, first-served system with $19 million available beginning July 1 and $24 million up for grabs next fiscal year.

“The biggest thing we focused on this session is to make sure government does no harm,” says Rep. Will Weatherford, R-Wesley Chapel. Weatherford, a businessman, is in line to be House Speaker following Rep. Dean Cannon, R-Winter Park, who takes the leadership post this fall.

But with the flame-out of federal economic stimulus funds next year, a predicted $6 billion deficit for fiscal year 2011-12 will challenge new leadership in the Legislature and Cabinet. And now it doesn't appear that bonus payments for oil leases will help balance the budget equation given current political winds.

This year's $3.2 billion budget deficit was closed with the help of $2.6 billion in federal stimulus bucks and shuffling $507 million money out of trust funds.

That budget action came much to the dismay of transportation advocates still fighting for the $160 million swept out of the transportation trust fund into the education budget. They hope Crist will rescue the money, but that would put the newly independent U.S. Senate candidate in an awkward battle with the teachers he gained favor with by his veto of the teacher tenure bill, Senate Bill 6.

In March, the Legislature relieved businesses of a nearly 1,100% increase in unemployment compensation taxes that would have kicked in last month. But that invoice will have to be paid in about two years unless it gets punted again.

Gov. Charlie Crist was quick to sign that piece of legislation, but he's also shown he can be dangerous with a veto pen having killed the teacher tenure bill supported by the Florida Chamber of Commerce and other business groups.

He also undid a campaign finance reform measure favored by Republican leaders. And just the threat of a veto killed a second attempt at property insurance reform that Crist vetoed last year.

Democratic leaders in the House and Senate are pushing for a veto of the $70.4 billion budget and two Gulf Coast legislators — Rep. Rick Kriseman, D-St. Petersburg, and Rep. Keith Fitzgerald, D-Sarasota — are leading the charge for a special session this summer to put a measure on the November ballot blocking future oil drilling in Florida waters. But as Republican legislators point out, that's a bit redundant — it's already illegal.

State leaders and business interests hope that the economy will have recovered enough by 2012 to ease the pain of those higher unemployment compensation taxes. To move the recovery along the Legislature passed bills such as tort reform to lower businesses' legal liability, economic development legislation targeted to manufacturing, the space industry and yacht builders among others and energy bonds to assist the remodeling industry.

The gaming compact with the Seminole Indian Tribe should also provide a boost to not only Tampa's Hard Rock Hotel and Casino and the Seminole Casino Immokalee, but also the pari-mutuels like St. Pete's Derby Lane and other dog and horse tracks in the region.

Sen. Dennis Jones, R-Seminole, crafted the compact along with Rep. Bill Galvano, R-Bradenton. Jones says, “Personally, I would have liked it to go a little bit further,” says Jones. But he also recognizes that it will be an ongoing discussion in Florida, which the senator says is already the sixth largest gaming state in the country.

Though the Republican-dominated Legislature contended with the challenges of a not-so-Republican, veto-wielding governor, Weatherford says he's pleased he and his colleagues held the line on taxes, fees, red tape and bureaucracy.

“That in and of itself is a success,” Weatherford says. “An increase in taxes can be devastating to an economy and businesses.”

WHAT PASSED

Proposed state constitutional amendments
• Federal health care reform ban: Asks voters to amend the state constitution to block the implementation of the federal health care mandates in Florida. (HJR 37)

• Redistricting: Asks voters to allow Legislature to consider “communities of interest” and minority voting blocs when drawing legislative districts and shifts the way two citizens-backed redistricting amendments would be implemented. (HJR 7231)

• Class size: Retains class size limits at school-wide average with hard caps for elementary, middle schools and high schools rather than going to inflexible maximums for every class room per 2002 class size constitutional amendment. (SJR 2)

Bills
• State budget: $70.4 billion budget includes $2.6 billion in federal stimulus funds and a $50 million installment of a $130 million incentive to bring Jackson Labs to Collier County. The Tampa-Hillsborough Expressway Authority must pay back $19 million to the state transportation trust fund, but $50 million less than originally proposed. Reserves of $1.4 billion could increase by $730 million if Federal Medical Assistance Percentages (FMAP) money is approved by Congress. (HB 5001)

• Economic development: The “Jobs for Florida” package. Tax incentives for manufacturers, space industry and film production. Governor's quick action closing fund gets $15 million for businesses considering moving to Florida. Sales tax on boats capped at $18,000. More incentives and flexibility for communities to attract baseball spring training teams. Funds for beach renourishment. (SB 1752)

• Property insurance reform: Increases capital surplus requirements for property insurers from $5 million to $15 million, but gives existing insurers 10 years to achieve that level; puts added restrictions on public adjusters; reduces from five to three years the period of time for a hurricane damage claim to be filed to minimize fraud; allows property insurers to get faster reviews on proposed rate increases for reinsurance and inflation costs. (SB 2044)

• Commercial insurance: Prohibits an association or fund from forming or managing a risk management mechanism; exempts certain types of insurance and commercial lines risks from some rate requirements; requires insurers or rating organizations establish and use rates, rating schedules, or rating manuals allowing for a reasonable rate of return on certain insurance and risks; increases penalties for fraud against seniors. (SB 2176)

• Unemployment tax: Puts off for two years a nearly 1,100% increase in unemployment compensation tax on businesses needed to replenish state's bankrupt unemployment trust fund. (HB 7033 - signed into law)

• Sales tax holiday: Reinstates back-to-school sales tax holiday on school supplies and clothing. Set for Aug. 13-15, it's estimated to save taxpayers $21 million. (HB 483)

• Private school vouchers: Corporate tax credit increased to fund low-income students attending private schools. (SB 2126 - signed into law)

• Renewable energy bonds/energy economic zones: Allows local governments to issue Property Assessed Clean Energy (PACE) bonds backed by property tax assessments on residences and businesses making energy efficiency improvements to buildings. Calls for two state agencies to study and recommend incentives for energy economic zones. (HB 7179)

• Gambling: Seminole Indian Tribe gaming compact provides exclusive right to tribe to operate three types of banked card games at five of its casinos including ones in Tampa and Immokalee. Allows Las Vegas-style slot machines at all seven of its casinos. State to receive $1 billion during next five years and more over 20 years subject to renegotiation. Pari-mutuels get a 15% reduction in their tax rate, get extended hours of operation and expanded poker limits. (SB 622 - signed into law)

• Tort reform: Slip-and-fall bill protects businesses from liability lawsuits by shifting more burden of proof to plaintiffs injured from falls on business premises. (HB 689)

• Attorney fee cap: Limits private firm attorneys fees to $50 million for cases litigated on behalf of the state's attorney general. (SB 712 - signed into law)
Monetary damages: Increases total amount recoverable from government agencies in lawsuits from $100,000 to $200,000 without legislative action. (SB 2060)

• Regulatory cost estimates: Requires state agencies to prepare statements of estimated regulatory costs of proposed rules if the rule has adverse impacts on small business or increases regulatory costs. (HB 1565)

• Federal health care: Permits attorney general to sue the federal government on behalf of individuals challenging the federal health care insurance law mandate. (HB 1143)

• Political campaigns: Regulates issue advocacy organizations, known as 527 groups, that raise and spend unlimited funds on political campaigns. (HB 1207 - vetoed)

• Workforce boards: Increases oversight of state workforce boards in response to improper spending by the Tampa Bay Workforce Alliance. (SB 5001)
Condominiums: Condo owners, with association approval, may opt out of unit insurance, delays fire sprinkler update mandate, prohibits delinquent owners from using common areas, and relieves investors in seven or more units from responsibilities of construction accidents. (SB 1196)

• Group homes: Allows group homes for the disabled to be within 1,000 feet of each other. (SB 1166)

WHAT FAILED

• Corporate income tax: Governor's proposal to cut the corporate income tax from 5.5% to 4.5% for most businesses. (SB 1680)

• Property insurance rates reform: Take two of the “Consumer Choice Act,” which aimed to increase competition and lower rates over the long term by reducing rate regulation on residential property insurance. (HB 447)

• Nonjudicial foreclosure: The “Nonjudicial Foreclosure Act for Nonhomesteaded Properties” would have allowed creditors, with required notice and agreement by the debtor, a right to foreclose nonjudicially by auction, negotiated sale or by appraisal.

• Corporate car tags: Corporate sponsored license plates would have offset a portion of the registration fee. (SB 1442)

• Medicaid reform: Differing plans of the House and Senate to reduce the cost of Medicaid to the state were unable to be reconciled. The House proposed to expand a managed care pilot program to all 67 counties within five years while the Senate called for expanding managed care to 19 counties in one year. (HB 7223/SB 1484)

• Medical malpractice: Would have protected emergency room doctors and nurses from malpractice lawsuits under sovereign immunity. (SB 1474)

• Sinkhole insurance: Aimed to reduce fraud and streamline sinkhole insurance claims. (Provision dropped from SB 2044 which passed.)

• Renewable energy: Allows state's largest electric utilities to charge ratepayers up to 2% of their 2009 profits for renewable energy investments such as for solar farms. (HB 7229)

• Term limits: Proposed amendment to state constitution to increase terms of state senators to six years and state representatives to four years, and limits state senators, state representatives, and elected county and municipal officers to 12 consecutive years in office. (HJR 495)

• Education reform: Teacher evaluations based in part on student test scores, rewarding the best teachers, and allowing administrators to more easily dismiss teachers with substandard evaluations. Gov. Crist vetoed. (SB 6)

• Fertilizer ordinances: Pre-empts Pinellas County's ban on the sale of fertilizer during summer months, and requires counties to justify enacting tougher ordinances. (SB 382/HB 1445)

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