Amid Insurance Crisis, Florida Will Use Budget Surplus To Ease Homeowners’ Burden
Updating a previous story, Florida House and Senate leaders will use part of a the state’s budget windfall to lessen the burden on homeowners. The state money will keep Florida residents from paying a steep insurance reassessments after a state-run insurance company ran up record deficits over the last year.
The action by Florida means that instead of facing an assessment of close to $200 for every $1,000 they pay in homeowners insurance, property owners are only likely to pay around $11. The proportion of the assessment will be slashed because lawmakers have agreed use surplus budget money to cover a $1.7 billion deficit run up by Citizens Property Insurance, the state’s “insurer of last resort.”
Fiscal Council Chairman Joe Negron, a Republican from Stuart, Fla., said he was dropping his proposal for a one-week sales tax holiday in August in favor of the using $920 million to pay down the Citizens’ deficit. He said that virtually eliminating a statewide insurance assessment on Florida real estate owners would be the equivalent of a major tax cut.
“I believe it’s the most responsible, beneficial tax cut,” Negron said.
House Insurance Chairman Dennis Ross, a Lakeland Republican, also supports the surplus plan and said the $920 million will pay for a little more than half of the Citizens’ deficit, while the remainder will be paid back over a 10-year period — reducing the cost to consumers to about $10.70 per $1,000 in premiums annually over the next 10 years. The legislators have such a large budget in large part because of increased Florida property tax revenue.
On Monday, the Senate Ways and Means Committee agreed to put $750 million of the budget surplus toward the Citizens’ deficit. Senate Banking and Insurance Chairman Rudy Garcia, a Republican from Hialeah, Fla., said he hopes to increase the amount as the bill moves forward. Lawmakers caution, however, that the Citizens’ deficit (which is based on claims made against the company during the 2005 hurricane season), could still rise.
If it does, consumers wouldpay a higher assessment than $10.70 a year, unless lawmakers agree to increase the use of surplus funds.
“This is a big win for Florida’s homeowners,” State CFO Tom Gallagher said in a statement. “Returning surplus revenue to Florida’s families is sound fiscal policy and commonsense tax relief.”
House and Senate property insurance bills moved through committees Monday, with major differences to be resolved in the next three weeks. Both bills now head for floor votes. Aside from the deficit issue, the House would eliminate Citizens coverage for homes valued at more than $1 million, while the Senate would keep the more expensive homes with Citizens through 2011, but subject them to a 25 percent surcharge. Citizens now covers about 6,000 pieces of primarily South Florida real estate in excess of $1 million.
Another emphasis of both bills is to make older homes more resistant to the strong winds that result in hazard insurance claims. The House bill would provide $100 million for a low-income Florida home loan program to help homeowners bolster their dwellings. The House also agreed to another $400 million to be used in a matching grants to allow storm-related home improvements. The Senate has $50 million for a similar program.
The House has a provision that would allow Florida insurance companies to raise rates by as much as 5 percent on a statewide average, or up to 10 percent in coverage territories, whereas the Senate bill doesn’t contain any such language. Lawmakers said the bills are aimed at trying to reduce the state’s role in the insurance market by limiting Citizens’ coverage, which now includes more than 800,000 policies. Several Senate Democrats say the bill doesn’t go far enough in addressing the state’s insurance problem after eight hurricanes in two years.
“I’m convinced that this is becoming Humpty Dumpty,” said Sen. Walter “Skip” Campbell, a Democrat from Fort Lauderdale, who thinks Florida ought to look at a broad proposal that would dismantle Citizens altogether and replace it with a more effective program.
Sen. Rod Smith, an Alachua Democrat, voted against the bill and called it “at best a Band-Aid approach at this juncture.”
While there are no easy answers, opponents say, if the state doesn’t find a way to reduce exposure for all Florida homeowners insurance consumers, they could face a much steeper bill if another huge storm strikes Florida in a highly populated area full of Citizens policies. He said some analysts suggest it could cause a deficit in excess of $25 billion.
“If you think folks are unhappy now — when they get a $25 billion bill think about the way they’re going to feel then,” said J.D. Alexander, a Republican from Lake Wales. “That will be an unpayable bill.”
