[StBernard] Bailout of hurricane insurer proposed

[Westley Annis]

Surplus might go to bail out Citizens
By Stephanie Horvath, S.V. Date

Palm Beach Post Staff Writers

Tuesday, April 18, 2006

Homeowners' wallets might be getting a break.

Committees in both the Florida House and Senate voted Monday to use tax
dollars to pay down part of the estimated $1.7 billion deficit at Citizens
Property Insurance Corp., the state's insurer of last resort.

The entire deficit would otherwise have to be paid for by the state's
homeowners, whose budgets are already strained by insurance rate hikes and
hurricane repair costs.

On Monday the Senate Ways and Means Committee voted to pour $750 million in
nonrecurring revenue into the hole at Citizens, while the House Fiscal
Council voted to use $920 million in nonrecurring revenue to cover part of
the shortfall.

The amendments were added to the property insurance reform bills that are
moving through the House and Senate. SB 1980 now moves to the floor. HB 7225
still has to go through the House Commerce Council.

The move comes a week after the legislature learned it has a total of $4.2
billion in increased revenue to spend in its 2006-2007 budget, and two weeks
after Gov. Jeb Bush, who opposed using tax dollars to bail out Citizens,
said he'd support using the money if it was accompanied by significant
reform.

Florida Chief Financial Officer Tom Gallagher, who is running for governor,
applauded the move.

"This is a big win for Florida's homeowners," he said. "Returning surplus
revenue to Florida's families is sound fiscal policy and common-sense tax
relief, and I commend our state legislators for taking this first step."

Rep. Joe Negron, the chairman of the House Fiscal Council, replaced his
proposal to offer a $500 million, weeklong sales tax holiday with $920
million in tax dollars to pay down Citizens' deficit. But Negron said the
legislature would not routinely bail out Citizens.

"This is not something we're going to do every year," he said. "Citizens is
on its own from here forward."

The House's bill would cover the first $920 million of the deficit, which
must be paid back immediately under Florida law, said Citizens spokesman
Justin Glover. Citizens has estimated it would cost Florida homeowners about
$110 per $1,000 of premiums paid to cover it.

The remaining $780 million would be recovered through an emergency
assessment that can be stretched over a number of years, as determined by
Citizens' board. Glover said the board has not yet determined the emergency
assessment's size and time frame.

State senators, meanwhile, decided to plug $750 million of general tax money
into the Citizens deficit, and to make sure that policyholders are fully
aware of their largesse.

Insurers would be required, in their policy renewal statements, to include
in 12-point type the wording: "The $____surcharge in your premium for the
assessment by Citizens Property Insurance Corporation has been reduced by
$____ due to an appropriation by the Florida Legislature."

The blanks would have to be filled in with the appropriate figures.

"This is really hard medicine," said Sen. Rudy Garcia, R-Hialeah, chairman
of the Senate Banking and Insurance Committee, which introduced the Senate
version of the bill 10 days ago.

Sen. Jim King, R-Jacksonville, was among several lawmakers who wondered why
the state couldn't plug even more money into the hole, given that the
Citizens' deficit is estimated at $1.7 billion and the catastrophic fund
deficit is $1.3 billion.

King said the state's healthy financial situation - which includes an
additional $960 million forecast by state economists last week - should
allow the state to "keep the constituents harmless" by spending more tax
money.

"All of a sudden, manna from heaven came and we have all this money," King
said.

Bill Newton, executive director of the Florida Consumer Action Network, said
using the tax dollars for Citizens' deficit is just returning the money to
its rightful owners.

"People are really just getting their money back. It's the sales tax they
paid in after the hurricanes for rebuilding," he said. "But it eases the
impact of the statewide assessment."

Staff writer Alan Gomez contributed to this story.

  
Find this article at: 
http://www.palmbeachpost.com/storm/content/business/epaper/2006/04/18/a1d_xg
r_insurance__0418.html