Cabinet Meeting Report–March 24; SBA and Florida Insurance Commissioner to Visit D.C. on FHCF in April
Mar 25, 2009
On Tuesday, March 24, 2009, the Florida Cabinet met in Tallahassee Florida. As part of its agenda, the Cabinet heard from several government organizations within its jurisdiction.
- As a final part of the State Board of Administration (“SBA”) agenda, Ash Williams updated the Cabinet on the SBA’s efforts to solicit federal support for the Florida Hurricane Catastrophe Fund. Both he and Florida Insurance Commissioner Kevin McCarty have plans to meet with officials in Washington, D.C. during early April, 2009. Mr. Williams assured Governor Charlie Crist that he would keep him apprised of all meeting dates and agendas. While Mr. Williams downplayed any chances of success he and Commissioner McCarty might have in securing federal funds, he said he remained optimistic.
Below is a summary of the complete Cabinet meeting:
Before taking up the main agenda, Florida Attorney General Bill McCollum, Florida Commissioner of Agriculture and Consumer Services Charles Bronson and Florida Chief Financial Officer Alex Sink recognized a number of community and service organizations from across the State.
Mr. Williams gave the SBA report, from which all of its action items were approved, most notably a request authorizing changes to the Lawton Chiles Endowment Investment Policy Statement, which the SBA claimed is necessary in order to give it needed flexibility to raise funds for the June 15, 2009 extraordinary budget balancing payout of $700 million that was approved in the January 2009 Special Session. A payout formula adjustment to reflect a reduction in capital contributions also was authorized.
In response to CFO Sink, Mr. Williams estimated that, depending upon the equity market status, “a couple of hundred million dollars” would be left in the Lawton Chiles Endowment Fund after the transfer takes place. (Note: The former Governor’s family has threatened to sue the State if the Fund is depleted.)
After gaining approval for its action items, the SBA presented the Cabinet with the annual State Pension Plan Asset/Liability Study Update. Despite the more recent declines in the economy, overall the news about the Pension Plan was good. Based on report prepared by the State’s outside actuary, Milliman, Inc., the Pension Plan should be funded at 93 percent level of current and future liabilities by July 1, 2009.
The Cabinet was advised that the decline was anticipated, and that the State Pension Plan has operated below 100 percent funding for over 30 years and never missed a payment. Mr. Williams pointed out that, in 1997, the Plan was funded at only 91 percent of liabilities and, just one year later, it was funded at 106 percent of liabilities. Mr. Williams added that in 2007, only seven out of 50 states’ pension plans were funded at or above 100 percent (including Florida) and that Florida still finds itself in the top quartile of state pension plans. Although Florida’s Pension Plan may remain under-funded for the intermediate term, even a persistent period of underfunding would not affect benefit payments to retirees. In light of this news, Mr. Williams went on to explain that the SBA recommends no changes be made to the investment policy of the Florida Retirement System at this time.
In response to CFO Sink’s inquiry about whether the Plan was positioned to take advantage of some of long-term investment opportunities in the current economic environment, Mr. Williams replied affirmatively. He added that pursuing long-term investments was likely, especially after the past three weeks in which the equity market made a small comeback, resulting in the addition of an estimated $9 billion dollars into Florida’s Pension Plan Fund. The Fund currently totals approximately $90 billion.
After Mr. Williams’ presentation, the Division of Bond Finance of the SBA (the “Division”) presented its action items for which it received approval without objection. To see a complete list of the Division’s action items, click here.
The Division reported that just last week, it had completed the sale of $400 million in Florida Lottery revenue bonds. Only $100 million of the Lottery bonds were originally offered; however, after seeing the bond issue success, the offering was increased to $400 million.
CFO Sink raised the issue of the credit rating for certain Florida-issued bonds that have been reduced to an A- rating due to declining revenue and less capacity for debt servicing. The Division reported that it has made the Florida Legislature aware of these issues and has advised that debt servicing should be a priority at this time.
The next Cabinet meeting will be held on Tuesday, April 14, 2009.
Please note that the material above is a brief summary of the discussion and events that took place during the Florida Cabinet meeting. It is not intended to be a comprehensive review of any particular issues relating to the policies and/or issues discussed. Further, this report should not be relied upon for making any specific decisions.
Should you have any questions about any of the above matters, please contact Colodny Fass. We will continue to follow this, and other issues related to actions taken by the Florida Cabinet, and provide information on, and analysis of, those issues and events as they arise.
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