Florida’s budget continues long trend of bond debt paydown

Florida’s $114.4 billion proposed are the root cause of the crisis that has raised property insurance rates and driven insurers from the state.

Watkins noted that there have been three special sessions of the Legislature over the course of the past two years which have focused on the property insurance market.

“Tort reform — I can’t overstate the significance of that. It’s a huge deal,” Watkins said. “Because the losses were primarily because of insurance fraud. It was institutionalized litigation. And then there were the attorney fees — where lawyers were incentivized to litigate and insurers were discouraged from settling illegitimate claims.”

He noted that the reforms are taking a while to work its way through the system, which it is doing now.

“And we have state support for incentivizing companies to come in and take policies out of Citizens Property Insurance Corp., which is happening,” he said.

Citizens is the state-created insurer of last resort, providing property insurance to customers the private insurance market won’t cover because the high likelihood of losses makes such business uneconomical.

“So we have new private capital coming into the state in the firm of new insurance companies to take policies out of Citizens because they see a more favorable litigation landscape going forward,” he said. “They have much more certainty about claims and losses because of the changes on the litigation front.”

In July, the Florida Insurance Guaranty Association tapped the municipal bond market for the first time in more than 30 years, selling nearly $600 million of tax-exempt fixed-rate and variable-rate bonds to help fund claims from insolvent insurance companies in the state.

The Florida Hurricane Catastrophe Fund is a tax-exempt state trust fund that provides reimbursements to residential property insurance companies for a portion of their catastrophic hurricane losses in Florida. 

The Cat Fund was bolstered in 2020 with bond proceeds from a deal that was upsized to $3.5 billion amid market conditions then favorable to issuers.

The budget recommends $1.1 million in funding for the Florida Office of Insurance Regulation to bulk up its ability to gather data on the property insurance market and $675,000 to hire independent reinsurance and mitigation research experts to bolster its ability to review filings and recommend tools to mitigate property damage from hurricanes.

The proposal also includes $1.1 billion in tax relief for residents, which focuses on reducing the cost of homeowner’s insurance as well as expanding sales tax holidays.

The tax package cuts include a one-year exemption on taxes, fees and assessments for homeowner’s insurance policies, which is expected to save taxpayers $409 million while cutting the average insurance premium up to 5%.

While some pundits expect the Federal Reserve to cut interest rates next year, Watkins said the bond division’s work is not Fed-dependent.

“I expect it will have no impact on us because we really don’t have any significant financing plans,” he said. “So I don’t see it affecting us or our operations because we’ve effectively shifted to a pay-go system. We’re funding important infrastructure initiatives with the resources available.”

He noted the state has also built up record reserves, balanced the budget and paid down debt.

“The economy has just been killing it for the past three years. We’ve been collecting revenues month-over-month every month that have been beyond our estimates,” Watkins said. “From where I sit, things really couldn’t be better. It’s easier than it’s ever been to tell Florida’s story, from a credit perspective.”

Florida is rated triple-A by Moody’s Investors Service, S&P Global Ratings and Fitch Ratings and all three assign a stable outlook to the state.

Turning to local governments, the Board of Miami-Dade County Commissioners approved its $10.4 billion fiscal 2023-24 budget on Sept. 21. The county’s operating budget totals $6.7 billion while the capital budget is $3.7 billion.

Separately, the Miami Commission on Monday cut the city’s operating budget for fiscal 2023-2024 by $25 million to $1.609 billion. Spending cuts to meet balanced budget legal requirements will be taken up at the Commission’s budget modification meeting in January.
 
The city’s capital budget remained at $1.125 billion for fiscal 2023-2024.