Florida Senator Alexander tries alternate route to Catastrophe Fund fix — in conforming bill
Mar 8, 2012
The following article was published in The Florida Current on March 8, 2012:
Sen. Alexander tries alternate route to fix Cat Fund – in conforming bill
By Gray Rohrer
Property insurers will be able to receive tax credits in exchange for up-front contributions to the Florida Hurricane Catastrophe Fund under a new provision introduced to the budget Thursday, the day before the scheduled end of the legislative session.
Sen. JD Alexander, R-Lake Wales, wants to give property insurance companies the option of paying their insurance premium taxes in advance in exchange for a tax break. He says it will raise $1.5 billion and help patch over a potential $3 billion shortfall in the Cat Fund — which acts as a state reinsurance fund — if a one-in-100-year storm (which has a 1 percent chance of happening each year) hits the state.
“It’s very permissive, it’s not a requirement. It’s just a tool,” Alexander said. “It’s just a funding mechanism tool to try to scrape up a little more cash.”
But property insurers aren’t sure how effective the tool will be. The Florida Insurance Premium Tax Pre-Payment Program, as it would be called, is optional, and the tax breaks would be paid out by the Cat Fund, meaning the program would provide short-term liquidity but still face a shortfall.
“It would provide them with a liquidity resource that would cost less in theory than if they had to borrow the money for liquidity purposes, but it does absolutely nothing to increase the ability of the Cat Fund to respond to a large storm. It only addresses liquidity,” said Don Brown, a former Republican House member who is now an insurance agent and senior fellow at the Heartland Institute, a conservative think tank.
The new provision is the latest attempt by Alexander to shore up the Cat Fund. He tacked on an amendment to a separate bill to reduce the fund’s coverage by $2 billion over two years, but Sen. Mike Fasano, R-New Port Richey, a perennial thorn in the side of property insurers, will try to strip that amendment out when the bill, SB 1346, comes up in the Senate on Friday.
Sen. Jack Latvala, R-St. Petersburg, led a revolt against Senate leadership last year over the issue of substantive policy decisions being inserted into budget conforming bills, and threatened to do so again this year in recent budget talks. Alexander, however, said the new tax credit program for the Cat Fund is budget-related and senators will be able to take an educated vote on the budget even with the new measure.
“It has to do with money and it’s a way to consider it,” Alexander said.
House budget negotiators agreed to take up the provision during a budget conference meeting Thursday.
Find this article here: http://www.thefloridacurrent.com/article.cfm?id=26888472