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WILLIAMS: A changed Charlie Crist
Early success overshadowed by mismanagement in Sunshine State
During his first two years in office, Mr. Crist was a fiscal all-star. He fought aggressively to cut property taxes, championing a measure that rolled back local property taxes and saved Floridians more than $1.3 billion. He wielded the line item veto pen, cut unnecessary spending and held state budget expenditures nearly flat in 2007 and 2008. Indeed, Mr. Crist scored 100 out of 100 for his performance on spending and revenue on the Cato Institute’s 2008 Fiscal Policy Report Card on America’s Governors and earned an overall “A” for his efforts. But somewhere between fiscal year 2008 and 2009, Mr. Crist had a change of heart.
On that same report card for 2010, Mr. Crist earned a “D.” He scored 64 on spending and a miserable 34 for revenue. The taxpayers of Florida know why. Mr. Crist passed a $2.2 billion tax increase, raising licensing fees on everything from vehicles to fishing and levying a $1 per-pack tax on cigarettes. Mr. Crist seems to think these reckless tax hikes are sound policy. In his State of the State speech this year he praised his own record, saying he opposed tax increases and favored responsible state government.
Mr. Crist’s budget policy isn’t even the most irresponsible aspect of his tenure as governor. His so-called “reform” of Florida’s insurance industry and his land-purchase debacle with U.S. Sugar are even more troubling.
The hurricane insurance policy in Florida is a two-headed beast. The Citizens Property Insurance Corporation provides insurance directly to homeowners at below-market rates while the Florida Hurricane Catastrophe Fund (CAT) regulates private insurance rates and requires insurers to purchase reinsurance from the state. Instead of streamlining and strengthening this system, Mr. Crist signed into law ill-conceived changes that exacerbated the flawed 1992 hurricane insurance policy. With the stroke of his pen, Mr. Crist explicitly made affordability the dominant goal in Florida’s hurricane insurance policy and shifted the primary costs from premium-payers to taxpayers.
Analysts estimate that the Citizens Property Insurance Corporation currently charges from 35 percent to 65 percent too little for premiums to cover their costs. Mr. Crist’s contribution to the malady was to expand the state’s previously limited role in the insurance market to more than 1 million policies and pledge $28 billion in guarantees in the CAT fund for insurers. The problem is the CAT fund is already broke. While the exact level of insolvency is unclear, the consensus is approximately $19 billion.
CAT’s insolvency is compounded by two factors. First, the artificially low cost of hurricane insurance has encouraged overbuilding in coastal zones, increasing the bill the state will face when a major hurricane rolls through. Second, Florida’s intrusion into the insurance market caused at least three major players - Allstate, State Farm and Nationwide - to curtail operations or pull out altogether. Start-up insurers filling the void lack cash-on-hand or any significant assets, which dramatically increases the state’s risk.
By creating unfunded liabilities, the state is absorbing market risk to promote affordability. If this sounds like the federal government’s pre-recession housing policy, that’s because it is. Florida is preventing private insurers from charging premiums that cover their risk while promising a bailout should the worst happen. This is a huge financial black hole that Florida can’t afford. Florida’s legislature recently voted to relieve stress on CAT by allowing private insurers to set rates and cover their risks. The governor vetoed the bill and Florida remains on the precipice. But Mr. Crist isn’t just piling up potential liabilities; he is spending plenty of real money, too.
In June 2008, Mr. Crist launched a plan to buy out U.S. Sugar Corporation (USSC) as part of Everglades Restoration, resulting in a $536 million deal to buy 72,000 acres. Reports from individuals involved as well as e-mail correspondence indicates that USSC largely dictated the terms of the deal, insisting on selling contaminated land that cannot be restored. The most disturbing aspect of the deal is the state overpaying by nearly $400 million because the sale is based on inflated and out-of-date 2004-06 appraisals. When the appraisal commissioned by Florida reported this, findings were suppressed, as e-mails between the South Florida Water Management District and Mr. Crist’s deputy reveal. Unfortunately, while the goal of the Everglades purchase is restoration, the effects are anything but. The deal brokered with USSC allows them to farm some of the land for seven years, while some 49,000 acres are so contaminated that they cannot be restored. The source of restoration funding, estimated at some $12.5 billion, is also unclear. Additionally, more than 12 ongoing restoration projects were halted so Florida could buy the land from USSC. Former Gov. Jeb Bush expressed his frustration, saying that Mr. Crist traded current, real restoration projects for potential projects years down the road. One of the most significant restoration initiatives axed was a reservoir in Palm Beach County - costing the South Florida Water Management District $25 million in cancellation fees.
Of deep concern to many in Florida is the apparent coziness between Mr. Crist and USSC. USSC, one of Mr. Crist’s biggest campaign supporters, carried more than $500 million in debt when negotiations began. Rival sugar companies note that they were never approached about similar sales, despite their comparable land holdings.
When Mr. Crist was elected, he offered the hope of responsible fiscal governance, sound judgment and integrity. His mismanagement of the state budget, tax hikes, reckless hurricane insurance policies and the seemingly sweetheart deal with USSC make responsible Florida taxpayers yearn for the old days and vow to restore good government to the Sunshine State.
Bob Williams is president of State Budget Solutions.
© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.
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