A House-Senate budget panel has added the state’s risk of incurring billions of dollars in possible hurricane insurance losses to Florida’s long-range financial outlook.
The new changes could dwarf potential budget deficits that the outlook anticipates in each of the next three fiscal years.
The joint Legislative Budget Commission agreed to add the insurance statement offered by Senate Ways and Means Chairman JD Alexander.
The Lake Wales Republican denied he was trying to send a message to Gov. Charlie Crist, who earlier this year vetoed a bill that supporters, including Alexander, say would have helped reduce the state’s hurricane liability.
“No, this is a report to the people of Florida,” Alexander said. “It was not a full report without noting this material problem that we have that could affect our financial outlook.”
It says the available liquidity and bonding potential in the Florida Hurricane Catastrophe Fund, which provides backup coverage to insurance companies, is about $7 billion short of meeting the fund’s maximum legal obligation this year.
Also, state-created Citizens Property Insurance Corp. would come up another $7 billion short of paying an estimated $23 billion in losses should Florida get hit by storm so strong that it could be expected only once every 100 years.
Those financial gaps could be filled through borrowing and assessments against insurance customers. That “may expose the state to much greater potential financial liability for hurricane-related costs,” the outlook statement says.
Some lawmakers were worried the statement might harm Florida’s bond rating, but it passed 9-1 with Sen. Al Lawson, D-Tallahassee, the only no vote. The outook then passed unanimously.
“To me, we’re raising kind of a red flag,” said Rep. Joe Gibbons, D-Hallandale Beach, who still voted for the statement. “I don’t think we need to bring undue attention to it.”
Alexander, though, said, “The truth will set you free. Tell the truth, lay it out — good, bad or indifferent.”
The outook forecasts a potential and unconstitutional spending deficit ranging from $923 million to $2.6 billion in the next budget year starting July 1 for critical to high priority needs unless lawmakers cut other spending, dip into trust funds or raise taxes and fees — or some combination of those steps.
The potential budget gaps for 2010-11 range from $2.3 billion to $5 billion and for 2012-13 from $1.1 billion to $5.2 billion.
The insurance bill Crist vetoed was aimed in part on persuading State Farm Florida to drop plans for getting out of the state after Insurance Commissioner Kevin McCarty denied a 47 percent rate increase. The company, a subsidiary of Illinois-based State Farm Insurance, is Florida’s second-biggest homeowner insurer behind Citizens with about 700,000 policies.
The measure would have let homeowners buy higher-priced, unregulated property insurance from highly capitalized national companies. Other companies still would have had to offer rate-regulated policies.
Crist said the “Consumer Choice” bill would have given the choice only to big insurers, not homeowners.
Alexander noted State Farm Florida’s headquarters are in his district and said he would support passing the bill again.
The commission also approved some midyear budget amendments that included opening a new Department of Children and Families call center in Marion County, represented by House Speaker Larry Cretul, R-Ocala.
Alexander defended the decision, saying a commercial call center recently closed in Marion, putting about 1,000 people out of work.