Florida Governor Rick Scott Vetoes Cat Fund Tax-Credit Plan

Florida Governor Rick Scott has chastised state lawmakers for failing to fully consider a controversial plan to use state premium tax credits to help shore-up the state’s homeowners’ reinsurance fund before attaching it to the state budget.

Scott used his line-item veto power to eliminate the Florida Insurance Tax Pre-Payment Program that would have allowed insurers and financial institutions to purchase up to $1.5 billion in tax credits. The money would have gone to help to cover a potential $3.2 million shortfall in the Florida Hurricane Catastrophe Fund.

Sponsored by Senator J.D. Alexander (R-Lake Wales), primarily at the behest of Wells Fargo, the plan was tacked onto the state’s budget during last minute negotiations without consulting other lawmakers and state regulators.

However, the plan soon came under fire from Cat Fund officials, other lawmakers, and insurers on a variety of financial and administrative issues. Among them the plan would have marked the first time the fund ever borrowed money directly from the state, which could have implications on the state’s credit rating.

“While the stated purpose of this program is to provide an additional funding mechanism for the Florida Hurricane Catastrophe Fund, the language was not fully vetted through the committee process,” stated Scott in his veto message.

The plan had envisioned insurers and other financial institutions purchasing tax credits that could have been used to reduce their state premium taxes by paying them up to 10 years in advance. The money then would have been lent to the Cat Fund, which would have been required to pay it back in annual installments.

Cat Fund officials had vocally opposed the plan, which they say was passed without their input.

For starters, they said there is no way to calculate just how much money would be raised by the program or its costs, making it impossible to determine how and where the money would be used.

Cat Fund Executive Director Jack Nicholson said the fund prefers its current structure that relies on bonds where the fund knows upfront how much money is raised and what the interest rates and administrative costs are.

“We prefer to go the pre-event bonding route,” said Nicholson. “It gives us certainty.”

By vetoing the bill, Scott also axed several other noncontroversial proposals aimed at streamlining the process that employers used to claim an exemption from having to purchase workers’ compensation coverage.

Under current state law, up to three corporate officers and three members of a limited liability company that have at least a 10 percent stake in the company can claim not to be covered under a workers’ compensation policy.

Among the documents the companies must file with the state is a notarized application and construction company officers must show proof they own a share of the company in the form of a stock certificate.

As of June 2011, over 1 million exemptions were on file with the state, a number that has dropped due to poor economic conditions. In fiscal year 2010-2011, construction industry exemption applications dropped 9 percent and non-construction exemptions by 9.6 percent.

The bill would have eliminated those two requirements and would have allowed employers to file or a workers’ compensation exemption form electronically. Applicants would have also had to provide their date of birth and their driver’s license number.

The bill would also have deleted a requirement that regulators publish an annual report on the worker’ compensation market.