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REVIEW SUMMARY
What: Legislative session begins March 8.
Issue: Will reforms include cutting the corporate income tax?
Impact: Job growth may depend on how pro-business Florida becomes.
From the sound of it, they mean business. That is, the Republican-dominated Legislature up to now has embraced newly elected Gov. Rick Scott's mantra — “jobs, jobs, jobs.”
And then there's that word: “change.”
There's a lot of that going on in Tallahassee these days.
Florida House Speaker Dean Cannon laid out his vision in a Feb. 3 letter to his members creating his Select Committee on Government Reorganization: “The 2011 legislative session is an opportunity for transformational change. We should thoughtfully and systematically pursue true reform and avoid the temptation to make changes simply for the sake of change.”
Pro-business bills filed so far have the speaker's reform agenda in mind, ranging from cutting corporate income taxes to rewriting growth management laws to reducing the state's near monopoly on property insurance. The state's property owners' vulnerability to hurricanes and the lack of private insurers' claims-paying capacity was the subject of a Feb. 23 lead editorial in the Wall Street Journal. “ ... It's clear that reforming Florida's insurance market is the single biggest challenge facing new Republican Gov. Rick Scott.”
The Journal's editors titled it, “Waiting for Hurricane Charlie (Crist)” with the equally attention-grabbing subtitle: “All Americans will pay if Florida doesn't reform its insurance market.”
With Crist out of the way — he vetoed a bill that would have partially deregulated insurance pricing — Sen. Garrett Richter, R-Naples, chairman of the banking and insurance committee, has filed Senate Bill 408, which aims to bring more private capital into the state's property insurance market (see below).
Other legislative attempts to right-size the inflated Citizens Property Insurance Corp., the state's largest insurer, and the Florida Hurricane Catastrophe Fund, a reinsurer, are expected before the March 8 kick-off to the regular session.
Gulf Coast legislators will lead much of the debate by virtue of their influential positions in the legislative hierarchy. Sen. Mike Bennett, R-Bradenton, is Senate president pro-tempore, has a position on every committee and has sponsored 53 bills at last count. On the House side, John Legg, R-Port Richey, is speaker pro-temporare and chairman of Cannon's select reorganization committee. Rep. Gary Aubuchon, R-Cape Coral, is vice chairman of the reorganization committee and chairman of the House Rules Committee, which means he will filter the bills that make it to the House floor.
Reducing the cost of state government is high on the agendas of Cannon, Gov. Scott and business groups such as Associated Industries of Florida. “The most important thing, in our mind, is about creating jobs, so government reorganization is important for us,” says Barney Bishop, CEO of the Tallahassee-based business lobbying group. He says his focus is on rules and regulations to see what's still necessary and dismantling the Department of Community Affairs (DCA).
Meantime, everyone knows the primary job of the Legislature over the next 60 days is creating a balanced budget. Everyone also knows Gov. Scott has proposed reducing that budget by $4.6 billion. No one knows what the exact outcome will be. Likewise, no one knows what legislative surprises lurk in the halls of the Capitol.
For now, however, we offer a preview of five business bills to watch, along with two lists of other bills that could affect your business and profits.
What the bill would do: The bill follows Gov. Scott's proposal to cut the 5.5% tax on corporate operating profits to 3% for 2012 and then reduce the tax 0.5% a year so that it goes away by 2018.
Effect if passed: Without the tax cut, it's estimated that next fiscal year the tax would bring in slightly more than $2 billion. The cut to 3% would reduce corporate income-tax revenue to nearly $1.6 billion next year, a $459 million savings. The state projects another $1 billion in corporate income-tax savings if the rate dropped to 2.5% in 2013.
Sen. Jim Norman, R-Tampa, and Rep. Shawn Harrison, R-Tampa, filed bills (SB 1222 and HB 503) that similarly reduce the state corporate income tax. Norman's and Harrison's bills are identical, but differ from Sen. Garrett Richter's bill in that the rate is reduced one percentage point each year beginning in the 2012 tax year and ending with the tax rate remaining at 0.5% effective Jan. 1, 2016.
“Just because the governor proposed it doesn't mean the Legislature is going to do it,” says Barney Bishop, CEO of Associated Industries.
Supporters: Florida Retail Federation, Florida Chamber of Commerce (if Tax Credit Scholarship Program is held harmless); Sponsor: Sen. Garrett Richter, R-Naples.
Opponents: Public employee unions.
Prediction: The tax rate will get cut some, but with a $3.6 billion budget gap, lots of room for compromise and reluctance shown by legislative leaders, it probably won't get cut nearly as much or as fast as Scott would like.
What the bill would do: The House bill cuts the number of weeks the state would pay benefits to the unemployed from a maximum of 26 weeks to a maximum of 20 weeks and as few as 12 based on the unemployment rate.
The Senate bill doesn't cut the length of eligibility for benefits but cuts the chances of paying out benefits to undeserving recipients by changing eligibility criteria. One provision would disqualify someone for the weeks he receives severance pay. An early version of the Senate bill proposing increasing the maximum unemployment compensation tax rate from 5.4% to 6.4%, but that has since been deleted and reduced to the current level.
Effects if passed: It would reduce unemployment compensation taxes on employers by reducing benefits to workers. The governor's budget proposal includes funds to pay interest on federal borrowing that businesses otherwise would have to pay beginning this summer.
Rep. Doug Holder, R-Sarasota, sponsored the House bill. He justifies it saying, “To move business into the state you have to give them a comfortability that Florida is a business friendly state.”
Supporters: Florida Chamber of Commerce, Associated Industries of Florida, Florida United Business Association, Florida Retail Federation. Sponsors: Sen. Nancy Detert, R-Venice, and Rep. Doug Holder, R-Sarasota.
Opponents: Florida Center for Fiscal and Economic Policy, AFL-CIO.
Likelihood of passage: A bill will pass along party lines, but compromises between the House and Senate versions are pretty much guaranteed.
What the bill would do: The “Community Renewal Act” would re-enact provisions relating to the definitions of “urban service area” and “dense urban land area” to allow and encourage cities and other urban areas to permit urban infill projects to reduce sprawl. The act would allow alternative methods to meet requirements for transportation facilities to be in place before development is completed (concurrency); would require a 90-day notice for a new or increased impact fee; allow permits with the Department of Environmental Protection or a water management district to be renewed and extended; and would change the process for adopting a comprehensive plan or plan amendment.
A comprehensive growth-management bill is expected to be filed that would rewrite the state's growth management laws. According to Senate Community Affairs Committee Chairman Mike Bennett, R-Bradenton, the bill will cut down “duplicate review” and speed up development permitting processes.
Effects if passed: If SB 174/HB 7001 are passed by super-majority votes of the House and Senate, the bill is one of several that will offset a lawsuit filed by several local governments, including Lee County, claiming that the 2009 SB 360 violated single-subject rules and was an unfunded mandate on local governments. The bill, however, could have less significance, or even be rendered moot, if a new bill surfaces as expected that would completely rewrite the state's growth management laws.
Supporters: Florida Chamber of Commerce, Associated Industries of Florida, Florida Home Builders Association; Sponsors: Sen. President Pro-tempore Mike Bennett, R-Bradenton, and Rep. Rich Workman, R-Melbourne.
Opponents: 1000 Friends of Florida, Sierra Club, some local governments.
Prediction: SB 174 will pass. A rewrite of the state's growth management laws may be difficult in the face of environmental groups' and some local government opposition, but it has strong support from business groups, legislative leadership and key members of the governor's regulatory transition team.
What the bill would do: Sen. Garrett Richter's property-insurance bill would reduce the time that claims can be made after a hurricane; increase the minimum surplus requirements for residential property insurers to $15 million; set rules for public adjusters; create a three-year statute of limitations for sinkhole claims; and shift the burden of proof from the insurer to the policyholder in contested sinkhole cases.
The bill also would follow established practices in other states by allowing an insurer to pay cash value and hold back replacement cash value until a written contract for repairs is obtained by the insured.
Effects if passed: The sinkhole provisions, which would make it more difficult for claims to be approved, would help reduce residential property insurance rates or at least minimize rate increases caused by rising reinsurance costs or other market factors. Requiring insurers to carry higher surpluses for claims would also reduce the amount taxpayers would have to pay in the event of a catastrophe.
Supporters: Florida Chamber of Commerce, Associated Industries of Florida, property insurance industry groups; Sponsor: Sen. Garrett Richter-R, Naples, and Rep. John Wood, R-Winter Haven.
Opponents: Public adjusters, Florida Justice Association (formerly Academy of Florida Trial Lawyers), Merlin Law Group.
Likelihood of passage: Passes, though numerous amendments are likely.
What the bill would do: The bill would require every employer to use the employment authorization program to verify the employment eligibility of each employee. Any business that does not use the E-Verify system would lose its license to do business in the state until the business has registered with the E-Verify system. The bill would prohibit an employer from employing an unauthorized alien; and would require every public employer — defined to mean any department, agency or political subdivision of the state — to register with and participate in the E-Verify system. The bill would prohibit a public employer, contractor or subcontractor of the government from contracting for services in the state unless the contractor or subcontractor registers and participates in the system.
Effects if passed: Illegal immigration would be curtailed, but costs to employers could slow business and employment growth. Agriculture, construction and hospitality industries would likely be most adversely affected.
Supporters: Floridians for Immigration Enforcement, the Federation for American Immigration Reform, the Immigration Reform Law Institute. Sponsors: Sen. Alan Hays, R-Umatilla, and Rep. Gayle Harrell, R-Stuart.
Opponents: Florida Chamber of Commerce opposes mandating that private employers use E-Verify. Associated Industries of Florida is working to amend it.
Prediction: Four committee stops, an anti-regulation agenda, business groups' opposition and general immigration controversy could kill this bill or at least dilute it to eliminate private-employer mandates.
HB 239 Numeric nutrient water quality criteria
Prohibits implementation of certain federal numeric nutrient water-quality criteria rules by the Department of Environmental Protection (DEP), water management districts and local governments; authorizes DEP to adopt numeric nutrient water-quality criteria for surface waters; and provides that certain total maximum daily loads and associated numeric interpretations constitute site-specific numeric nutrient water-quality criteria.
SB 142/HB 201 Negligence
Known as the “crashworthiness” bill, it would insulate car manufacturers from liability in crash cases by changing how juries apportion fault. By reversing a 2001 court ruling, it allows juries to hear evidence relating to a driver's actions in product liability cases and require fault, and by extension subsequent damages, be apportioned among the parties involved. The measure would reverse the Florida Supreme Court ruling in D' Amario v. Ford Motor Co. A similar House bill, (HB 201) contains an exemption for first responders, particularly law enforcement officers killed in high-speed crashes and rear-end collisions.
SB 288 Design professionals
Provides for limited liability for engineers, surveyors and mappers, architects, interior designers and registered landscape architects as a result of construction defects resulting from the performance of a contract. Provides that, if a contract requires professional liability insurance, the contract may not limit the liability of the design professional in a manner that is inconsistent with the insurance requirements.
SB 302 Drug testing/unemployment compensation
Creates a Drug Deterrence Pilot Program. Provides for the screening of individuals to determine which individuals must be tested and authentication and admissibility of drug tests in unemployment compensation hearings.
HB 407 Residential building permits
Prohibits local governments from requiring certain inspections of buildings, structures or real property as condition of issuance of residential building permits.
SB 410 Impact fees
Retroactively to July 1, 2009, re-enacts a provision relating to the burden of proof required by the government in an action challenging an impact fee.
SB 508/HB 733 Tax on sales, use and other transactions
Establishes an annual three-day sales-tax holiday in August within which sales taxes are not collected on certain clothing, computers and school supplies.
SB 942/HB 671Tax credits for R&D
Provides a tax credit for certain research-and-development expenses; establishes eligibility requirements for research-and-development tax credits; sets limitations regarding eligibility; provides an amount for such credit; and a maximum amount of credit that may be taken during a single tax year by a business. Mirrors the federal tax credit recently renewed for two years by Congress.
HB 945 Growth management
Revises criteria for establishing a rural land stewardship area; revises provisions relating to transferable land-use credits; and revises credit limitations.
SB 1330/HB 885 Residential property insurance
Authorizes an insurer to use a rate for residential property insurance that differs from its otherwise filed rate after a specified date under certain circumstances. Requires insurance agents to get written approval from an applicant for coverage and certain policyholders relating to charges and assessments potentially being imposed under a Citizens Property Insurance Corporation policy.
HB 4115 Powers of the consumer advocate
Deletes power of consumer advocate to prepare an annual report card grading personal residential property insurers.
Other bills of interest:
SB 136/HB 237 Enforcement of immigration laws
SB 172 Security cameras
SB 270 Property tax discounts for early payment
SB 300 Term limits
SB 304 Illegal or undocumented aliens
SB 376/HB 493 Tax on sales, use and other transaction
SB 434/HB 531 Assessment of residential property
SB 466 Tourist development tax
SB 530 Condominium/Cooperative/Homeowners' Associations
SB 582 Local business taxes
SB 630 Use of public moneys and property
SB 768 Seaports
SB 810 Pain management clinics
SB 980 Convention development taxes
SB 998 Property rights
SB 1072 Real property
The Legislature is expected to place on the next general-election ballot three more constitutional amendments. Here's a summary:
Healthcare Freedom Act (SJR 2)
This Senate joint resolution aims to nullify ObamaCare. It would prohibit laws or rules from compelling any person, employer or healthcare provider to participate in any healthcare system. It would permit a person or an employer to purchase lawful healthcare services directly from a healthcare provider and permits a healthcare provider to accept direct payment from a person or an employer for lawful healthcare services.
In a press release, Sen. President Mike Haridopolos says, “The Healthcare Freedom Act is a top priority of mine and the 27 other Republican senators who have co-sponsored this constitutional amendment. We believe in patient-centered, not government-centered, health care. When the legislative session starts in less than two weeks, I hope Senate Joint Resolution 2 will be the first bill passed by the full Senate. Our message is clear — Floridians can make their own healthcare choices without mandates from the federal government.”
If placed on the ballot, the measure would require 60% voter approval. The issue will likely be decided by the U.S. Supreme Court.
Cap on State Spending (SJR 958)
Referred to as the “Taxpayer Bill of Rights,” or “TABOR,” this amendment would place a cap on the state's revenue based on inflation plus population growth instead of the current system, which is indexed to personal income growth over time. It would require excess revenues be deposited into the budget stabilization fund, be used to support public education or returned to taxpayers.
Democrats have raised concerns about possible effects on the state's bond rating. Republicans counter that the new criteria will discourage excess borrowing.
“Putting a smart cap in the constitution that requires a super majority to exceed encourages future Legislatures to have fiscal discipline,” according to Associated Industries. AARP, meanwhile, calls it “a prescription in search of a condition to cure.”
Indeed, opposition to the amendment is widespread: AARP, Florida Association of Counties, League of Women Voters, Florida Public Interest Research Group, Florida Center for Fiscal Responsibility, AFL-CIO, Democrats. The Florida League of Cities opposes revenue and expenditure caps but has not taken a position on the Senate resolution. The league would oppose any measure that limits local government revenues or expenditures, which this resolution does not.
If placed on the ballot, final adoption would require 60% voter approval.
Homestead/Non-homestead Property (SJR 658/HJR 381)
This amendment would prohibit increases in assessed value of homestead property if fair-market value of property decreases; it would reduce the limitation on annual increases in assessments of non-homestead real property; provide an additional homestead exemption for owners of homestead property who have not owned homesteaded property for a specified time before purchase of a current homestead.
The aim is to reduce the cost of owning property, making the state a more desirable location for homeowners and businesses.
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