2011 legislative session ends late, mired in controversy. The 2011 legislative session came to a close at 3:35 a.m. Saturday after a long night of political maneuvering by House and Senate leaders. The fragile budget agreement between the House and Senate began to unravel late Friday night, when a significant majority of senators revolted against leadership and voted down two House budget bills that would have deregulated numerous professions, including interior designers. Sens. Jones and Latvala argued that forcing significant policy shifts through the budget process was unfair to the majority of senators who did not have an opportunity to vet the issues in committee. In retaliation, the House, led by Speaker-Designate Will Weatherford, unanimously voted down a Senate budget bill related to procurement by Citizen’s Property Insurance Corporation.
Meanwhile, the House continued to work through more than 40 budget bills received from the Senate, while holding one budget bill, H.B. 7203, which needed to be adopted by the Senate. The budget conference report for the bill contained tax reductions as well as a number of provisions related to economic development. Included amongst these provisions was a tax reduction for coin-operated arcade machines, added to the conference report at the behest of Sen. John Thrasher, which allegedly targeted the Jacksonville Kennel Club, a greyhound racing track. Speaker Dean Cannon refused to adopt the conference report, as many House members believed that the tax reduction equated to an expansion of gaming.
Nearing the midnight deadline for the conclusion of the regular session, the Senate quickly drafted and passed a concurrent resolution to extend the session to 6:00 p.m. Saturday. A few minutes prior to midnight, the House also adopted the resolution, thus extending the regular session. Shortly thereafter, only H.B. 7203 remained to be adopted by both chambers. However, legislative rules and adopted floor procedures prohibited amending the conference report attached to the bill, thus blocking the House from striking the greyhound racing track tax reduction. Consequently, the House pulled up an abandoned House budget bill, H.B. 143, and amended the substance of H.B. 7203 onto the bill, but without the tax reduction for greyhound racing tracks. The House passed H.B. 143 and adjourned sine die, effectively making a take-it-or-leave-it offer to the Senate. Sen. Mike Haridopolis, visibly frustrated, called the Senate back into session at 3:05 a.m., passed the final budget bill approximately 30 minutes later, and also adjourned sine die.
Legislature approves $69 billion budget, filling a nearly $4 billion deficit. The Legislature approved a $69.7 billion budget for fiscal year 2011 – 2012, closing a nearly $4 billion budget deficit by reducing a number of areas that included education, health care, and state employee benefits. While this is the fifth consecutive year of budget reductions, the budget for 2011 – 2012 fiscal year had been the most difficult to balance because of the loss of a significant amount of federal stimulus funds, as well as an increased caseload in the state’s Medicaid program. In addition to the funding reductions, the Legislature also reduced the number of authorized positions (or FTE) by nearly 4,500 positions, many of which were vacant.
The fiscal year 2011 – 2012 budget affected the various appropriations areas as follows:
- Agriculture and Natural Resources.The Agriculture and Natural Resources budget was funded at a level of $2.5 billion, a nearly 14-percent increase over the prior year, due in part to an appropriation of $305 million from the sale of surplus lands. Among other funding provisions, the budget includes $100 million for restoration projects related to the Deepwater Horizon oil spill, $16 million for beach restoration, and nearly $10 million from BP for food safety testing and a seafood marketing campaign.
- Education.The Higher Education budget totaled $6.8 billion, a 4.3-percent decrease from the prior fiscal year. Included in the higher education budget is an eight-percent tuition increase for state colleges and universities. Among other items, the budget also includes $27.2 million in additional funding for student financial aid, and an $87 million reduction in the Bright Futures program. The PreK – 12 Education budget totaled $12.2 billion, representing a nearly 12.5-percent decrease from the prior fiscal year. This reduction represents an approximately 3.2-percent reduction in per-student funds. The PreK – 12 budget includes $2.93 billion for class-size compliance, $200 million in General Revenue funds to replace federal stimulus funds, and an additional $2.97 million for state assessments.
- Government Operations.The Government Operations budget was funded at a level of $1.7 billion, a one-percent reduction over the prior year. The budget includes $33.9 million to fund the development of an automated child support system and $25.5 million to offset reductions in ad valorem tax revenue for fiscally constrained counties.
- Health Care.The Health Care budget totaled $29.9 billion, which represents an approximately five-percent increase over the prior fiscal year, required in part to cover the reduction in the federal Medicaid match rate. The budget includes $2.05 billion to restore the medically needy program, $56 million to increase Medicaid dental provider rates by 48 percent, $36 million for Kidcare caseload growth, $17.8 million for 1,000 additional “slots” in the nursing home diversion program, and restoration of $73 million in the Department of Children and Families for mental health and substance abuse services and maintenance adoption subsidies.
- Judiciary. The Judiciary budget was funded at a level of $4.9 billion, a 4.5-percent decrease over the prior fiscal year, which includes a nearly five-percent reduction in positions. The budget includes $44.2 million to the clerks of court to offset a trust fund deficit, $38.9 million to the state courts to offset a trust fund deficit, $5.1 million for community-based programs for misdemeanant youth, and privatization of prisons in Region 4 of the Florida Department of Corrections system.
- Transportation. The Transportation budget was funded at a level of $10.6 billion, a 6.1-percent increase over the prior fiscal year. Included in the budget are two significant trust fund transfers: $189.5 million from the State Housing and Local Government Housing trust funds, and $150 million from the State Transportation Trust Fund. The budget includes $6.8 billion for the Transportation Work Program, $616.8 million for school readiness, $125 million for economic development, $21.3 million for state aid to local libraries, $15 million for state armories, and transfer of driver’s license services to local tax collectors, a savings of $6.5 million during the next two years.
Significant growth management revisions passed through the budget process. As part of the budget package, the House and Senate agreed to a significant revision of the state’s growth management laws. Some lawmakers and environmentalists, who argued that the changes should have been reviewed and debated in a more open or transparent fashion, opposed inclusion of the growth management changes in the budget process. Among other provisions, H.B. 7207:
- Makes concurrency for parks and recreation, schools, and transportation facilities optional for local governments
- Applies and revises the expedited comprehensive plan amendment process statewide
- Deletes the requirement that comprehensive plans be financially feasible
- Deletes the twice-a-year limitation on comprehensive plan amendments
- Removes industrial areas, hotels/motels, and theaters from the list of developments of regional impact (DRI)
- Creates an exemption from the DRI process for mining projects and allows those mines to enter into agreements with the Department of Transportation
- Adds a new two-year permit extension, but caps the maximum extension at four years
- Prohibits local governments from having referenda for local comprehensive plan amendments
Medicaid overhaul passed by the Legislature. Heralding the most significant change in Florida’s Medicaid program in at least 15 years, the Legislature passed H.B. 7107 and H.B. 7109. The reforms will impact nearly every Medicaid provider in Florida by transforming the Agency for Health Care Administration (AHCA) from a manager of health care to a financier of health care. Key features of the new Medicaid reform include:
- Statewide Managed Care. The state’s Medicaid population will be served almost entirely by managed care over 11 regions throughout the state. Managed care plans eligible to participate in the reform plan include not just HMOs but also health insurers, exclusive provider organizations, provider service networks, and accountable care organizations. Medicaid recipients who are either mandatorily or voluntarily excluded from the reform plan will continue to be served by fee-for-service providers.
- Network Adequacy. Managed care plans are required to pay for noncontracted emergency services and must maintain a region-wide network of providers that must meet AHCA-defined access standards. Plans must also generally contract with AHCA-designated “essential” providers, such as federally qualified health centers.
- Continuous Improvement. Managed care plans must meet AHCA-defined performance standards and expected milestones for improving performance.
- Incentivized Shared Savings. In lieu of a typical cost-containment measure such as a medical loss ratio (MLR), the reform proposal utilizes a shared shavings model, the achieved savings rebate (ASR). Under this model, managed care plans may retain up to 7.5 percent of pretax income as a percentage of revenue, with an additional one-percent incentive for plans that meet AHCA-defined quality measures. Unlike an MLR that is principally focused on spending, plans that achieve better health outcomes will be financially rewarded under the ASR model.
- Low-Income Pool (LIP). The LIP, which operates under an existing S. 1115 waiver through the current Medicaid Reform program, continues to exist under the new reform proposal. LIP funds may be used to compensate hospitals, primary care providers, and primary care access systems to offset shortfalls in Medicaid reimbursements, pay for uncompensated care, and finance coverage for the uninsured. The exact amount of funding available under the new reform proposal will be determined through a negotiation between AHCA and the federal Centers for Medicare and Medicaid Services (CMS).
- Tort Reform. Tort liability of health care practitioners and providers is limited to $200,000 for a cause of action arising out of services provided to a Medicaid recipient. The cap covers a wide variety of health practitioners, such as physicians, dentists, podiatrists, and nurse practitioners, and extends to business entities under which such practitioners practice.
Property insurance reforms head to the governor. Senate Bill 408 was sent to the governor on Wednesday and is the culmination of at least two years of work to significantly reform Florida’s property insurance laws. The proposal engendered lengthy committee debates on sinkhole insurance fraud, actual cash value vs. replacement cost value, and enhanced regulation of public adjusters. The reform measures include:
- Increasing the minimum surplus requirements for residential property insurers to $15 million.
- Expanding exclusions from losses covered by the Florida Hurricane Catastrophe Fund to include losses caused by perils other than a covered event, such as fire, theft, flood, or rising water.
- Increasing from 10 percent to 15 percent the amount a residential property may increase premiums based on a rate filing to adjust its rates for the cost of reinsurance.
- Authorizing residential property insurers to provide written notice of policy changes without non-renewing the entire policy.
- Limiting public adjuster compensation for reopened or supplemental claims to 20 percent of the claim payment (10 percent for Citizen’s claims) and requiring additional disclosure statements and notices to certain parties.
- Requiring insurers to provide two replacement-cost coverage options for payment of personal property insurance claims. The first option pays the full replacement cost without reservation, while the second pays the depreciated value and holds back the remainder of coverage until the policyholder provides receipts.
- Requiring a policyholder to file windstorm and hurricane claims within three years and sinkhole claims within two years of the covered loss.
- Continuing to require an insurer to offer sinkhole coverage, but specifically defining “structural damage” to narrow the definition of a sinkhole loss.
- Requiring a policyholder to pay 50 percent of sinkhole testing costs up to $2,500, if the policyholder requests testing after an insurer denies the claim.
Upon receiving the governor’s signature, the bill will become effective.
Motor vehicle insurance reforms die in committee. Despite compelling evidence highlighting a crisis in personal injury protection (PIP) claim fraud, the Legislature once again did not pass proposals that proponents argued would meaningfully reduce such fraud. The issues were separated into two proposals — one that dealt primarily with attorney’s fees and medical provider examinations (H.B. 967 by Rep. Mike Horner and S.B. 1694 by Sen. Garrett Richter), and one that dealt more broadly with issues related to PIP fraud (H.B. 1411 by Rep. Jim Boyd and S.B. 1930 by Sen. Ellyn Bogdanoff). Both proposals encountered significant opposition in the House and Senate from trial attorneys and physician groups.
Various members of the Legislature tried to amend some of these issues onto other bills; however, only two issues survived on bills that passed the Legislature: S.B. 2160 (containing language relating to expanded use of long form crash reports) and H.B. 1087 (creating civil monetary penalties for motor vehicle insurance fraud). Subject to the governor’s signature, these bills will take effect July 1, 2011.
Commercial insurance and workers’ compensation reforms approved by the Legislature. Following up on last year’s deregulation of ratemaking for most forms of commercial insurance, H.B. 99 by Rep. Brad Drake deregulates additional forms of commercial insurance, which include general liability; nonresidential property; nonresidential multiperil; excess property; and burglary and theft. Subject to the governor’s signature, the bill will take effect October 1, 2011. In the area of workers’ compensation, H.B. 723 by Rep. Mike Weinstein provides for extraterritorial reciprocity for workers’ compensation claims under certain conditions. Florida employees injured while temporarily working in another state will receive benefits under Florida’s workers’ compensation law, while out-of-state workers temporarily working in Florida are exempt from Florida’s workers’ compensation law and will thus receive benefits under the law of their home state. Subject to the governor’s signature, the bill will take effect July 1, 2011. In addition, H.B. 1087 by Rep. Doug Holder, among other provisions, authorizes insurers to pay workers’ compensation benefits to workers through the use of a prepaid card as a cost-saving measure, and also changes the timing of the assessment for the Specialty Disability Trust Fund from a fiscal year to calendar year calculation. Subject to the governor’s signature, the bill will take effect July 1, 2011.
Physician tort reform proposals approved in the final week of session. In the final week of the legislative session, two significant proposals providing additional medical malpractice protection for physicians and nonprofit medical schools, as well as a proposal requiring out-of-state physicians and dentists to obtain expert witness certificates in order to testify in medical malpractice actions, were passed by the Legislature. S.B. 1676 by Sen. John Thrasher extends sovereign immunity protection to Florida not-for-profit postsecondary institutions that operate an accredited medical school, as well as its employees or agents that have agreed in an affiliation agreement to provide patient services to a public teaching hospital. The act will take effect upon receiving the governor’s signature and applies to all claims accruing on or after the date of the governor’s signature. H.B. 479 by Rep. Mike Horner requires out-of-state physicians and dentists to obtain an expert witness certificate in order to testify in a medical malpractice action. For in-state physicians and dentists, the grounds for discipline are expanded to include providing deceptive or fraudulent expert witness testimony related to the practice of medicine. In addition, a pre-suit notice of intent to initiate litigation for medical malpractice must include an authorization for release of protected health information, which authorizes the disclosure of protected health information that is potentially relevant to the medical malpractice claim. Subject to the governor’s signature, the act will take effect October 1, 2011.
Department of Economic Opportunity created out of a merger of state agencies. Created out of a merger of the Office of Tourism, Trade and Economic Development (OTTED), portions of the Department of Community Affairs (DCA), and portions of the Agency for Workforce Innovation (AWI), the Department of Economic Opportunity will be in place by October 1, 2011. The responsibilities of the new department include:
- Oversight and coordination of economic development, housing, growth management, community development programs, and unemployment compensation.
- Development of a single, statewide five-year strategic plan to address the promotion of business formation, expansion, recruitment, and retention in order to create jobs for all regions of the state.
- Establishment of annual performance standards for Enterprise Florida, Inc., Workforce Florida, Inc., VISIT Florida, and Space Florida.
- A streamlined incentive process whereby incentives for economic development projects must be approved or denied within 10 days of submitting an application to the department. Quick Action Closing Fund projects require recommendation to the governor in seven days. In addition, the governor may approve projects costing less than $2 million; projects from $2 million – $5 million require notification to the Legislative Budget Commission (LBC); and projects costing more than $5 million must be approved by the LBC.
The State Economic Enhancement and Development (SEED) Trust Fund is created within the department to fund the state’s economic development efforts. The trust fund is funded as follows:
- Effective July 1, 2012, $75 million from documentary stamp tax revenues, currently dedicated to affordable housing trust funds, is redirected into the SEED Trust Fund
- Effective July 1, 2012, State Transportation Trust Fund dollars are redirected into the SEED Trust Fund, phased in over three years: $50 million for fiscal year 2012 –13; $65 million for fiscal year 2013 –14; and $75 million for fiscal year 2014 –15 and subsequent years
- The affordable housing trust funds are maintained as in current law
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G. Donovan Brown
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Jonathan P. Kilman
Paul W. Lowell
Thomas J. Maida
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