Infusion will prop up Citizens
By JENNIFER LIBERTO
Published April 18, 2006
TALLAHASSEE - A plan to bail out the state-run insurer of last resort appears poised to pass both chambers of the Legislature with a price tag as high as $920-million.
Lawmakers in House and Senate committees on Monday embraced different plans to bail out Citizens Property Insurance Corp. and ease homeowners' insurance costs statewide.
Citizens faces a $1.7-billion deficit due to hurricane claims, and under the legislation homeowners would still see rate increases. But they would be on the hook for far less: as little as a $10.70 increase per $1,000 of premiums each year for a decade. The average increase currently proposed for homeowners is $195 per $1,000 of premiums for one year.
The House measure is more generous than the Senate's, providing $920-million as opposed to $750-million. But Senate leaders may be willing to go higher, said the bill's Senate sponsor, Rudy Garcia, R-Hialeah.
The bailout was helped along when state economists last week found an additional $1.2-billion in tax revenue beyond the $3.2-billion surplus they had already forecast.
"This is sort of a first cousin to a tax break," said House Speaker Allan Bense, R-Panama City, on Monday. "And it helps people with their assessments, because a lot of people can't afford it."
The final figure will be worked out by House and Senate leaders in private talks that will include other budgetary issues.
While Citizens is the insurer of last resort, providing insurance to 820,000 property owners who can't find coverage from private carriers, state law requires that Citizens assess all Florida property insurance policyholders to remain financially solvent. Everyone pays when Citizens runs a deficit.
Florida policyholders are paying about 7 percent more on this year's premiums to cover Citizens' 2004 deficit of $516-million. Last month, Citizens said its deficit from 2005 had swelled to $1.7-billion.
The House version comes up with $920-million by abandoning a proposed sales tax holiday on the first $5,000 value of taxable items for one week in August. The tax holiday didn't resonate with most lawmakers and is now dead, House leaders say.
Rep. Joe Negron, R-Stuart, chairman of the House Fiscal Council and a candidate for state attorney general, described the Citizens insurance rate hike as "a back-door tax increase." He also emphasized that what the Legislature is doing is for next year only.
Yet the House version has other controversial measures, such as allowing Citizens to drop some 6,400 policyholders who have policies valued at more than $1-million. The Senate charges the million-dollar policyholders 25 percent more each year until dropping them in 2011.
Democrats in both chambers called the bailout measures a "Band-Aid" fix that doesn't go far enough. Four Democrats in the House Fiscal Committee voted against the bill. In the Senate Ways and Means Committee, the only vote against the bailout was cast by Sen. Rod Smith, D-Alachua, a candidate for governor.
The first person to champion a bailout was Chief Financial Officer Tom Gallagher, who is also running for governor. But the measure foundered until Gov. Jeb Bush said a few weeks ago that he would support it.
Part of the Tallahassee political climate change toward bailouts can be attributed to the insurance industry, which has lately been lobbying heavily for it. Cash-strapped private insurers would have to front the money to relieve Citizens until they reimbursed themselves by passing the charge on to their policyholders, which state law allows.
"We support most of both bills, but if I say we're happy, people say it's a bad bill because the insurance industry is behind it," said Sam Miller, executive vice president of the Florida Insurance Council and Voice of Insurance Industry.
--Times staff writers Tom Zucco and Steve Bousquet contributed to this report.