Taxation

Bills That Passed

• Manufacturing Machinery & Equipment Sales Tax Exemption (HB 7007)
• Sales Tax Holiday (SB 406)
• Expanding a sales tax exemption for aircraft maintenance (SB 406)

Bills That Did Not Pass

• Motor Vehicle Fee Decrease (SB 1832)
• Insurance Premium Tax Increase Collection of Internet Sales Tax (SB 1832)
• Reducing the Communications Services Tax  (SB 316 and HB 7097)
• Corporate Income Tax Cut  (SB 562 and HB 401)
• Taxation of Prepaid Calling Cards

Manufacturing Machinery and Equipment

Expansion of the sales tax exemption for the purchase of machinery and equipment (M&E) is a long-standing Florida TaxWatch recommendation.  The exemption would apply to all manufacturing M&E purchases, not just M&E for new businesses or ones that could show the new equipment would increase output by at least 5 percent. The removal of this restriction—which has created a competitive disadvantage for Florida manufacturers—will save businesses $115.3 million in state sales taxes and $26.0 million in local sales taxes annually.  This was one of the Governor’s top priorities. Passage was uncertain until late in the session, when the exemption was amended onto a bill (HB 7007) that creates a review process for economic development incentives.  The bill passed.  House Democrats have threatened a lawsuit because the bill did not pass by a 2/3 majority (it passed 68-48).  The Constitution requires a 2/3 vote for bills that affect local revenues.  The House Speaker says he is confident passage of the bill is on firm legal ground, because the impact to local government is minimal.

Sales Tax Holiday

There will be another three day holiday this year. From August 2, 2013, through August 4, 2013, purchases of clothing costing $75 or less per item, school supplies costing $15 or less per item, and personal computers costing $750 or less per item would be exempt from state and local sales taxes.  Including computers in the popular “Back to School” holiday is new.   It is estimated that the holiday would save taxpayers $34.7 million.  SB 406--a budget conforming bill that contained the sales tax holiday among a number of economic development provisions—has been passed by the full Legislature.

Motor Vehicle Fee Decrease/Insurance Premium Tax Increase

SB 1832 proposed to roll-back the motor vehicle registration fees that were increased in 2009, reducing the cost by $12, saving taxpayers $225 million.  To pay for it, the Senate proposed to eliminate a 25-year old tax credit that insurance companies can take against their premium tax liability of up to 15 percent of salaries paid to Florida employees.  This would have been a tax increase of at least $230 million a year on insurers, and even with the motor vehicle fee rollback would result in a net $180 million tax increase in FY 2013-14.  Florida TaxWatch supports the roll-back of the motor vehicle fees but has concerns about the tax increase proposed to make it up.  There is evidence that the credit has been successful in promoting the insurance industry in Florida and insurance and corporate headquarters have been designated as target industries in the state’s economic development efforts. For more information, see the recent Florida TaxWatch Briefing.  The bill passed the full Senate but the House it to remove the IPT provisions and provide for a five-year rollback of the motor vehicle fees. The full House did not take a final vote on the bill.  The Senate then amended the IPT and motor vehicle fee language onto another House bill (HB 635) that dealt with other insurance issues and passed it, but the House did not take it up.

Collection of Taxes on Internet Sales

Although early action on this issue was promising, the Legislature again did not pass remote sales tax legislation.  SB 316 and HB 7097 died in their respective Appropriations Committee. This legislation would have helped to ensure that sales taxes are collected on taxable internet sales, a long-time recommendation of Florida TaxWatch.. This tax has always been due, but federal law has freed non-Florida retailers from collecting the tax, leaving the onus on Florida consumers to remit the tax themselves. By expanding the definition of nexus, the bill would have required more internet sellers to collect the tax themselves and remit the money to the state. The Governor and legislative leaders indicated that any internet sales legislation must be revenue neutral. Both bills reduced other taxes to offset increased sales tax collections. The House bill created an annual back to school sales tax holiday that would last as long as the additional revenue would allow.  The Senate bill reduced the Communications Services Tax which nearly all Floridians pay on wireless phones, cable and other services, as well as providing a sale tax holiday.  All these tax changes are supported by Florida TaxWatch research.

Corporate Income Tax Reduction

SB 562 and HB 401 would have increased the exemption from Florida's 5.5% corporate income tax from $50,000 to $75,000, another priority of the Governor. The exemption was increased from $5,000 to $25,000 in 2011 and was increased to $50,000 last year. The new exemption in HB 562 would provide savings to all corporate income taxpayers and completely eliminate tax liability for an estimated 2,000 businesses. If the new exemption had been enacted, approximately 70 percent of corporate income taxpayers would have become totally exempt due to the three exemption increases since 2011. The bill would reduce corporate income tax collections by and save businesses an estimated $19.1 million annually. Florida's corporate income tax is expected to bring in $2.3 billion in FY 2013-14.  The Senate bill died in committee and the House bill was never heard.

Communications Services Tax Reduction

SB 316 required revenue collected from enforcing sales tax collection on internet sales to be used to reduce the Communications Service Tax rate. A recent Florida TaxWatch Briefing showed that Florida has one of the highest tax rates on communications services in the nation—it can exceed 16%--and that rate is much higher than the sales tax rate on other retail purchases in Florida. This raises questions about the fairness of the tax rate, its economic neutrality, its effect on the competitiveness of Florida businesses and the attractiveness of Florida’s economic climate. SB 316 died in the Appropriations Committee.

Taxation of Prepaid Calling Cards

SB 290 and HB 435 would clarify that prepaid arrangements are only subject to the sales tax.   Prepaid calling was exempt from the CST law and instead was subject to the sales tax. However, the Department of Revenue last year issued an interpretation that certain prepaid arrangements were subject to the CST, such as arrangements that included texting, internet and email. This interpretation raises concern because the CST has many complicated provisions which make application at the point of sale level difficult. SB 290 died in the Appropriations Subcommittee on Finance and Tax.  HB 435 died in the Finance and Tax Committee.

Unified Communications Services Tax Rate

HB 303 and SB 1422 would have changed the CST to a “unified” tax by establishing one tax rate for all services and all jurisdictions. The stated legislative intent is to work toward the future reduction in the CST rate while ensuring the local governments are treated in a revenue-neutral manner in the aggregate. These bills were not heard in committee.

Florida's Budget

Here are some highlights of the new state budget:        

Budget Total - The new budget totals $74.493 billion, including $26.828 billion in General Revenue.  The conference report was $71 million more than the budget passed by the House and $195 million more than the Senate’s.  It is $4.5 billion (6.4 percent) more than the current budget.

State Employee Positions - The budget funds 114,678 state employees, a reduction of 3,499 (‐3.0 percent).

Reserves - $2.4 billion, including $1.2 billion in general revenue reserves.

Trust Fund Sweeps - $385 million, $204 million from housing, but no sweep from Transportation.

State Employee Pay Raises - A salary increase of $1,400 for state employees making $40,000 or less and $1,000 for those making more than $40,000.

Teacher Pay Raises - A salary increase of up to $3,500 for those deemed “highly effective” and those deemed “effective” receiving an increase of at least $2,500

PreK-12 Education - A $1.1 billion increase, to increase per student funding by $404.  

Higher Education - A 3 percent tuition increase and $144 million in university and college building projects.

Human Services - Total funding of $31.1 billion.  No category of Medicaid coverage was eliminated.  No provider reimbursement rates were reduced and nursing home rates were increased by 2 percent. A KidCare enrollment increase of 6,899 kids is funded.

The legislature considered a number of bills and budget issues that would implement cost savings measures, many of them recommended by the Florida TaxWatch Government Cost Savings Tax Force.  Several of these are included in more detail in other sections of this Legislative Update.

Note:  A number of provisions in the new state budget support Center for Smart Justice recommendations.  More information on this will be posted soon.

Bills That Passed

• Reducing Medicaid Fraud  (HB 939)
• Transparency in State Spending  (HB 5401)
• Improving State Contracting and Procurement  (HB 1309)
• Efficient Use of State Property and State Leased Space (HB 1145)
• Encouraging Public-Private Partnerships for New Construction (HB 85) 
• Fraud Deterrent System for School Readiness Providers

Bills That Did Not Pass

• State Information Technology Governance 
• Replace the State’s Accounting System (FLAIR) with a More Modern One
• State Pension Reform
• Expanding the Certified Audit Program
• Inmate Reentry - ID Cards and Faith and Character-based Programs
• Collection of Sales Tax on Internet Sales
• Inmate Reentry Programs
• Increasing the Use of Electronic Monitoring

Reducing Medicaid Fraud - HB 939 modifies and clarifies several Medicaid provisions to increase protections against Medicaid fraud and abuse (for more information see Center for Health and Aging section).  This bill passed.

Transparency in Government Spending – HB 5401 amends the Florida Transparency Act to require the creation of a single website through which all other websites required by the act may be accessed and provides for websites for public employee and officer data and state fiscal planning data.  It also expands the contract information that agencies are required to upload onto the Florida Accountability Contract Tracking System (FACTS).  This bill passed.

State Contracting and Procurement - HB 1309 will make a number of changes to the state’s purchasing and contracting system, including requiring that every contract and grant agreement of more than $100,000 must have a certified contract manager, requiring the CFO to audit certain agency contracts after execution and requiring that grant managers responsible for agreements in excess of $35,000 must receive training for accountability in contracts and grant management.  This bill was approved by both chambers.

State Property and State Leased Space – HB 1145 gives the Department of Management Services more authority to coordinate and direct state agency use of state-owned and privately-leased office space. It requires DMS to make recommendations for using capital improvement funds to implement the consolidation of state agencies into state-owned office buildings. It makes changes to facilitate the sale of non-conservation surplus state lands.   HB 1145 passed.

Public-Private Partnerships for New Construction - HB 85 will facilitate public-private partnerships, when cost-effective, to construct public-purpose projects. The intent of this bill is to encourage investment in the state by private entities and to provide the greatest possible flexibility to public and private entities to contract for the provision of public services.  This bill passed.

Fraud Deterrent System for Child Care Providers - HB 7165 makes changes to the state Early Learning programs. The bill includes provisions for fraud investigations and penalties for providers and parents who submit fraudulent information on eligibility and attendance.  HB 7165 passed.

State Information Technology - The State is still without an entity that is in charge of IT strategy and business process implementation on an enterprise-wide basis, leaving a fragmented system in place that causes the inefficient use of millions of taxpayer dollars annually. Florida TaxWatch released a Briefing on the issue earlier this session.  SB 1762 created the Department of State Technology (DST) as an executive agency under the Governor. The DST must develop, implement, and manage state enterprise information technology services. The House had a different approach and ultimately, an agreement could not be reached (for more information see the Other Issues section).  

Replace the Florida Accounting Information Resource (FLAIR) with a Modern Accounting System - The House’s IT governance bill (HB5009) would have required the new Agency for State Technology to begin implementing the successor to FLAIR.  It did not pass.

Pension Reform - Two state pension reform bills which would have increased the use of Defined Contribution in the state retirement system were considered.  HB 7011 was approved by the full House but the chambers could not come to an agreement.  (For more information see the Other Issues section.)

Certified Audit Program – HB 495 would have expanded the Certified Audit Program by allowing a taxpayer to participate in the program after being issued a notice of intent to conduct an audit.  The Government Cost Savings Tax Force recommended this to enable the State to increase audit coverage by freeing up existing auditors to conduct additional audits, and therefore the amount of taxes collected, with no additional cost to the State.  HB 495 passed the House but died in Messages.

Inmate Re-entry - HB 7121 directs DOC to provide every Florida-born inmate with a state ID card and certified copy of their birth certificate and also encourages faith and character-based initiatives.  However, language creating a reentry program for nonviolent, drug offenders was removed from the bill. The Florida Tax Watch Government Cost Savings Task Force recommended re-entry programs as an effective way (if done properly) to maintain public safety, decrease recidivism, and minimize cost to the taxpayer.  (see Center for Smart Justice section for more information). HB 7121 died in Messages.

Collection of Sales Tax on Internet Sales – SB 316 and HB 7097 would have helped ensure that sales taxes are collected on taxable internet sales, a long-time recommendation of Florida TaxWatch and the GCSTF.  Both SB 316 and HB 7097 died in their respective Appropriations Committee. (for more information see Taxation section.)

Increase Inmate Reentry Programs and Expand Electronic Monitoring – HB 69 and SB 1704 are bills that use electronic monitoring as part of re-entry programs. However, these bills were never heard in committee.

Florida TaxWatch Center for Competitive Florida

Bills That Passed

• Manufacturing Machinery and Equipment Sales Tax Exemption (HB 7007)
• Reducing Risk in Citizens Property Insurance Corporation (SB 1770)
• Economic Development Program Review (SB 406 and HB 7007)
• Corporate income tax credit for property taxes paid in an enterprise zone (SB 406)
• Removing lifetime caps on QTI and Defense/Space Business tax refund programs (SB 406)
• Increasing the New Markets program credits by $15 million total, $3 million per year (SB 406)

Bills That Did Not Pass

• Reducing the Size of the Florida Hurricane Catastrophe Fund (HB 1107 and SB 1262)
• Expanding the Economic Gardening program  (HB 663)
• Requiring Economic Development Incentive Recipients to Post Surety Bonds (SB 446)

Manufacturing Machinery and Equipment - Expansion of the sales tax exemption for the purchase of machinery and equipment (M&E) is a long-standing Florida TaxWatch recommendation.  The exemption would apply to all manufacturing M&E purchases, not just M&E for new businesses or ones that could show the new equipment would increase output by at least 5 percent. The removal of this restriction—which has created a competitive disadvantage for Florida manufacturers—will save businesses $115.3 million in state sales taxes and $26.0 million in local sales taxes annually.  This was one of the Governor’s top priorities. Passage was uncertain until late in the session, when the exemption was amended onto a bill (HB 7007) that creates a review process for economic development incentives.  House Democrats have threatened a lawsuit because the bill did not pass by a 2/3 majority (it passed 68-48).  The Constitution requires a 2/3 vote for bills that affect local revenues.  The House Speaker says he is confident passage of the bill is on firm legal ground, because the impact to local government is minimal.

Citizens Property Insurance Corporation – SB 1770 addresses many reforms to Citizens’ Property Insurance, including establishing a clearing house to help get policies to the private market which is expected to shift 217,000 of the 1.3 million Citizens policies to the private market.  It reduces maximum policy size from $1 million in 2013 to $700,000 (unless there is not a “reasonable degree of competition”) by January 2017 – reducing by $100,000 per year; eliminates coverage for new construction (or “substantial improvement) seaward of the coastal construction control line or within the Coastal Barrier Resources System; and establishes an Inspector General within Citizens’ to improve accountability.  

Florida TaxWatch has analyzed Citizens Property Insurance Corporation in Reducing the Concentration of Risk and encourages responsible reductions in the amount of risk in Citizens. While this bill was watered down somewhat as the session wore on, provisions of this bill promote that recommendation   SB 1770 passed.

Economic Development Conforming Bill – The House and Senate conference members agreed on a compromise between two economic development packages (SB 406 and HB 5601) as a budget conforming bill.  The original Senate bill focuses on the evaluation and accountability of current state economic development incentives, while the House package includes changes to tax credits and exemptions.  The resulting approved bill (SB 406) includes:

• Creating a three day “back to school” sales tax holiday for August 2-4, 2013
• Creating a three-year review cycle for economic development programs
• Uniformly applying Return on Investment calculation for programs
• Requires DEO to report certain data on its website about incentive program
• Expanding a sales tax exemption for aircraft maintenance
• Exempting natural gas used to generate electricity in a non-combustion fuel cell from sales tax
• Making changes to the sales tax distribution to local governments for the purpose of constructing or renovating Major League Baseball spring training facilities, including increasing the amount
• Removes the cap on the amount a recipient may receive under the Qualified Target Industry and Qualified Defense Contractor and Space Flight Business tax refund programs
• Increasing the credits available for the New Markets program by $15 million total, $3million per year.

 Economic Development Incentive Program Evaluation and Accountability - Several bills were considered to strengthen the state’s economic incentive programs by increasing evaluation and accountability. Both SB 406 and HB 7007 require incentive program applicants to be evaluated for their economic benefits and create a 3-year review schedule for all incentives. The reviews would be performed by the Office of Economic and Demographic Research (EDR) and the Office of Program Policy Analysis and Government Accountability. Both bills passed.

Florida Hurricane Catastrophe Fund (Cat Fund) - HB 1107 would have reduced the size of the $17 billion Florida Hurricane Catastrophe Fund.  The bill was amended late in the session to reduce the size of the fund by only $500 million, instead of $3 billion. A key provision required the FHCF to issue a promissory note for unpaid claims to Insurers if the FHCF obligations were not met. This amendment is significant because currently there are no provisions for payment by the FHCF over the amount of reserves plus the amount that they can borrow with post-event bonding.   SB 1262 originally would have also decreased the size of the Florida Cat Fund from the current $17 billion to $14 billion over three years. The legislation also increased the CAT Fund co-pay from the current minimum of 10 percent to 25 percent over a three year period. A strike-all amendment was adopted to change the aggregate insurers’ retention level to no more than $5 billion, obligate the Fund to provide $17 billion in reimbursements, regardless of its claims paying capacity, require a line of credit, and eliminate the “cash build-up factor” that was scheduled to be 25 percent in the 2013-14 contract year, and has been in statute since the 2009-2010 contract year.  Too many different approaches ultimately doomed the legislation.  HB 1107 died in Messages and SB 1262 died in the Appropriations Committee.

Florida TaxWatch has extensively analyzed modifications to the Florida Cat Fund in the report Risk & Reform which analyzed the economic impact of these changes and other potential modifications to the CAT Fund.

Economic Gardening - HB 663 would have changed the Economic Gardening Technical Assistance Program from a pilot to a permanent program. Economic gardening is a long-term, economic development strategy that focuses on job creation in small local businesses that already exist. This pilot program was created in 2009 and funded three out of the last four years, and the new budget does include $1 million for the program. HB 663 passed the full House but died in Messages.

Surety Bond for Incentive Recipients - SB 446 have required companies receiving incentives from the Quick Action Closing Fund and the Innovation Incentive Programs to post a surety bond or an alternative, unless waived by DEO, when receiving those incentives. This bond or alternative secures repayment of the incentives if contracted goals of investment and job creation are not met. The bill was approved by the Senate but died in Messages.

Florida TaxWatch Center for Educational Performance & Accountability

Bills That Passed

• Early Learning Governance and Accountability (HB 7165)
• Virtual Learning (HB 7029)
• Charter Schools (HB 7009) 
• School Technology Infrastructure  (HB 7009) 
• Accountability and Access to Achievement Data (SB 1720) 
• Virtual Education FEFP Funding  (SB 1514)
• Exceptional Student Education  (SB 1008)
• Teacher Preparation Accountability  (SB 1664)

Bills That Did Not Pass

• School Personnel Performance Evaluations  (HB 7141) 
• Parent Empowerment  (SB 867) 

Early Learning 

HB 7165 changes governance of Early Learning and increases accountability in the administration of the program (School Readiness and VPK) as supported by CEPA is a Session Spotlight released recently. The bill establishes the Office of Early Learning (OEL) within the Choice Office of the   Department of Education under an Executive Director who is fully accountable to the Commissioner of Education. The bill requires the OEL, among other things, to:  adopt a list of approved curricula that meets the curriculum performance standards; identify a pre-assessment and post-assessment for school readiness; and coordinate with other agencies to perform data matches on individuals or families participating in the school readiness program. 

Virtual Learning 

HB 7029 allows individuals or organizations that provide online courses, including massive open online courses, which are measured by statewide assessments to apply for approval as state-level providers. It also creates the Florida Accredited Courses and Tests Initiative (FACTs); providing for application of certain courses and assessments toward promotion, graduation, and degree attainment and authorizes a school district to contract with qualified contractors to administer and proctor statewide standardized assessments or assessments associated with Florida-accredited courses.

Charter Schools and School Technology Infrastructure

HB 7009 includes several provisions to increase charter school accountability and transparency, as well as provisions to expand charter school growth and flexibility. It includes provisions to make available to charter schools unused district facilities; provides disclosure requirements for charter applicants that were previously subject to corrective action or financial recovery plans; allows high-performing charter schools to determine their enrollment capacity and caps; and allows for FCS institutions with effective teacher preparation programs to operate charter schools under certain circumstances. The bill encourages total school transformation using blended learning models in exchange for flexibility and exemption from certain statutes and allows districts and providers to offer part-time K-12 virtual instruction in all courses, rather than only those courses that are measured through statewide assessments or end-of-course-exams. The bill also allows a district to establish an innovation school within the district, with statutory flexibility, responsibility, and authorization similar to charter schools.  The bill also contains provisions to require the technology infrastructure, connectivity, and capacity of all public schools and school districts to “load test” and independently verify that the infrastructure is appropriate, adequate, efficient, and sustainable. Verification of sufficient technology and infrastructure must occur prior to full implementation of online common core assessments for all kindergarten through grade 12 public school students. 

Accountability and Access to Achievement Data

SB 1720 requires the Commissioner of Education to improve and streamline access to data maintained in the K-20 data warehouse by creating and fully implementing, by June 30, 2014, a web-based interface to serve as a single location for public access and restricted self-service access for authorized organizations under The Family Educational Rights and Privacy Act (FERPA) privacy requirements. CEPA addressed this issue in a February Briefing, urging the Legislature to push policy that requires that data be moved out of the warehouse and into the public domain – in a manner that is cost effective, user-friendly, and highly valuable for education and economic development decision making. CEPA is confident that all FERPA privacy requirements will be held to the highest standards.   

Virtual Education FEFP Funding

SB 1514 Allows school districts to extend instruction for virtual education courses into the summer for students who do not complete the course by the end of the regular school term and authorizes school districts to include students enrolled in virtual instruction courses provided in district facilities in the district’s capital outlay FTE. The bill also limits the credits earned by students enrolled in the FLVS to 1.0 FTE and essentially recalibrates FTE funding for virtual education. This provision further exasperate the FLVS’s ability to plan for potential enrollment and may severely limit opportunities for students who need additional instructional time or for those who wish to accelerate their instruction. The bill also extends funding to provide an additional hour of intensive reading instruction in the 100 lowest performing elementary schools for the 2014-2015 SY.

Exceptional Student Education

SB 1008 provides for increased parental involvement in decisions regarding student assessment and placement and clarifies student eligibility for services. They bill also require school districts to provide exceptional student education-related services for a home education student with a disability who is eligible for services and who enrolls in a public school for the purpose of receiving those services.  SB 1108 was amended on the Floor to provide exemptions for the assessment of exceptional students under extraordinary circumstances.

Teacher Preparation Accountability

SB 1664 revises the requirements for approval of educator preparation programs to be based on performance outcome metrics and streamlines the core curriculum to be focused on standards-based instruction. The bill requires teaching candidates to demonstrate that they have a positive impact on student learning growth in field experiences before completing a program.

School Personnel Performance Evaluations 

HB 7141 requires that classroom teacher performance evaluations be based solely upon the performance of students assigned to the classroom teacher and that all classroom teachers be evaluated using either a learning growth or student achievement measure. In evaluating non-classroom instructional personnel, the bill requires school districts to use student outcome data that reflects the employee's actual contribution to the performance of students in his or her area of responsibility.  HB 7141 died on the Calendar and SB 980 died in Rules.

Parent Empowerment

HB 867 enables parents, by petitioning the school district, to request implementation of a parent-selected turnaround option in a chronically failing school. The turnaround option requested by parents must be considered for implementation by the district school board at a publicly noticed meeting. The bill prohibits school districts and charter schools to consecutively assign students to teachers with an annual performance evaluation rating of unsatisfactory or needs improvement and requires that parents of students assigned to an out-of-field or chronically low-performing teacher be informed of the availability of virtual instruction delivered by an in-field, high-performing teacher.  SB 867 failed on a tie vote on the Senate Floor.

Bills That Passed 

• Diagnosis Related Groups Implementation
• Physical Therapy and ARNP Scope of Practice
• Reducing Medicaid Fraud
• Physician Assistants Scope of Practice 

Bills That Did Not Pass

• Health Care Reform: Medicaid Expansion Alternative (Both Senate Plans) 
• Health Care Reform: Medicaid Expansion Alternative (House Plan)
• Telemedicine

Diagnosis Related Groups

SB 1520 requires AHCA to implement a prospective payment plan for Medicaid hospital inpatients based on Medicaid Diagnosis-Related Group (DRG) methodology. The bill also requires AHCA to establish uniform base rate for non-exempt hospitals and have certain items in place prior to the inclusion of intergovernmental transfers (IGTs). Hospital outpatient reimbursement remains cost-based under certain provisions.  Florida TaxWatch has recommended that Florida proceed with implementing a prospective payment plan for Medicaid hospital inpatients based on Medicaid Diagnosis-Related Group (DRG) implementation on July 1, 2013 as currently written in law. 

If authorized in the GAA, AHCA may modify inpatient reimbursement with policy adjustors based on specified services or diagnoses, provider type, or Medicaid patient age. In addition, AHCA may adjust reimbursement to long-term acute care hospitals if budget neutrality continues. Further, AHCA may establish an alternative to DRGs for reimbursement rates regarding newborn hearing screening, certain transplant and tuberculosis services, and state-owned psychiatric hospitals.

The bill also establishes the Statewide Medicaid Residency Program (SMRP) which was proposed in the Governor’s budget. The bill also addresses disproportionate share (DSH) funding regarding payment calculations and tuberculosis patients.  The bill passed.

For more information on DRGs and the SMRP, please read the Florida TaxWatch report, Florida Should Proceed with Medicaid DRG Implementation

Reducing Medicaid Fraud

Medicaid fraud remains a concern for Florida’s taxpayers today, just as when the Florida TaxWatch Government Cost Savings Task Force recommended increased protections against Medicaid fraud and abuse.  HB 939 modifies and clarifies several Medicaid provisions to increase protections against Medicaid fraud and abuse. These proposed changes include, but are not limited to, increasing the number of years a provider must keep records, notification requirements for a change in principal, requires background checks for Medicaid managed care providers, authorizes the Agency for Health Care Administration (AHCA) to use additional resources in Medicaid fraud oversight, requiring AHCA to enter into an interagency agreement with the Division of Insurance Fraud regarding anti-fraud plans by managed care plans. The bill addresses other issues relating to termination, fines, remedies, sanctions, overpayment, and onsite inspection. The bill passed.

Physical Therapy and ARNP Scope of Practice

Florida TaxWatch has recommended that advanced registered nurse practitioners (ARNPs) be allowed to practice to the full extent of their training.  HB 413 would specifically authorize physical therapists (PTs) to implement physical therapy treatment plans provided by an ARNP, and clarifies that PTs may also implement their own treatment plans and those of practitioners of record within their respective scope of practice and within a specified time.

Pursuant to section 464.012(3), Florida Statutes, an ARNP already may order “diagnostic tests and physical and occupational therapy” within an established framework.  However, PTs are not expressly authorized to implement ARNP-generated treatment plans under current law.  This bill facilitates the ability of ARNPs to practice within their training and have their plans for physical therapy implemented.  The bill passed.

Physician Assistants Scope of Practice 

Florida TaxWatch has recommended that Physician Assistants (PAs) be allowed to practice to the full extent of their training.  SB 398 authorizes a supervising physician to delegate to a licensed physician assistant the authority to order medication for that physician’s patient while in a hospital or other licensed facility.  The bill correspondingly permits the licensed physician assistant to order said medication under the supervising physician’s supervision. For the purposes of this delegation, the medication order does not count as a prescription.   The bill passed.

Health Care Reform: Medicaid Expansion Alternatives

After vigorous debate and procedural posturing (e.g., requiring every bill to be read in full), the Florida House of Representatives rejected a plan that would have accepted approximately $51 billion in federal funding over several years to cover more than 1 million uninsured.  This follows decisions earlier in the Session by both the House and Senate to not pursue traditional Medicaid expansion as spelled out in the federal health care law.  Neither of the two main alternative options successfully passed the Legislature, and the third option passed only in a very limited form that did not address its original purpose by creating a new program.

SB 1816 (the “Negron Plan”) and HB 7169 (the “House Plan”) were each voted favorably by their respective chambers (the Senate plan as a strike-all amendment to the House plan) but did not receive support by the final reviewing chamber. Only bill language accepting federal funding survived after floor amendments, and the House elected not to pursue the alternative option further.

SB 1844 (Senate Option 2/the “Bean Plan”) successfully passed both House and Senate.  However, the bill is now very different from the original bill. It no longer creates a new Health Choices Plus Program, changes certain eligibility requirements for the current voluntary Florida Health Choices Program, reaffirms the corporation’s ability to establish criteria for product prices and eligibility, and appropriates $900,000 in nonrecurring general revenue to the Agency for Health Care Administration (AHCA) for the administration and operation of the Program.

Note: Any reconsideration of 2014 federal funding could occur during a Special Session or the Legislature may revisit the issue in subsequent years for then available funding.  

For more details on the three approaches as originally proposed, click here.

 Telemedicine  

Telemedicine can be used for primary care services, remote patient monitoring, medical education, and other health-related services.  Its impact to the State of Florida will be something to watch.  SB 898 and HB 499 would have prohibited health insurers, health maintenance organizations (HMOs), and corporations from denying coverage for a service delivered through telemedicine rather than face-to-face. Telemedicine services must be treated on the same basis.  The bill permitted telemedicine payments (coinsurance, copayments, deductibles) if the cost is not greater than charges applied in a face-to-face health service. The bill directed the Department of Health and its boards to repeal any rules prohibiting the use of telemedicine, and to lead an interagency study on telemedicine that will submit a report of recommendations to the Legislature by July 1, 12014.  SB 898 died in Banking & Insurance.  The House bill has not been heard.

Center for Smart Justice

Note:  A number of provisions in the new state budget support Center for Smart Justice recommendations.  More information on this will be posted soon.

Bills That Did Not Pass

• Juvenile Justice Education
• Inmate Reentry - ID Cards and Faith and Character-based Programs 
• Inmate Reentry Programs

Juvenile Justice Education

HB 441 would have established greater accountability for juvenile justice education programs. The legislation required cost and effectiveness information on programs in order to compare, improve, or eliminate a program or program activity. The bill required DOE to adopt rules, in collaboration with providers for objective and measurable student performance measures and program performance ratings. School districts and juvenile justice education providers will be required to plan for career education, eliminate barriers to education, and address access to virtual education. Each student in a juvenile justice education program would have a transition plan, to be developed upon entry into the DJJ educational program. HB 441 has passed the full House but the Senate did not take it up.

Inmate Reentry Programs

Several bills creating reentry programs were filed this year.  In these programs the inmate will have the opportunity to participate in substance abuse treatment, work release program, faith-and character-based program, ID registration programs, and a number of other helpful services.  The Center for Smart Justice and the Florida Tax Watch Government Cost Savings Task Force have recommended re-entry programs as an effective way (if done properly) to maintain public safety, decrease recidivism, and minimize cost to the taxpayer. 

HB 7121 and SB 1032 originally directed DOC to establish and administer reentry programs for nonviolent, drug offenders. The programs would provide substance abuse treatment and other services followed by a period of drug offender probation. They also required DOC to provide every inmate who is within two years of release access to the Florida Ready to Work Certification Program. DOC was also be given policy direction to expand its faith- and character-based institutions to serve both male and female inmates and required to provide every Florida-born inmate with a state ID card and certified copy of their birth certificate.   This would help inmates in job seeking and opening a bank account. However, both bills were amended to strip out everything but the ID card and birth certificate provision and language only encouraging faith and character-based initiatives.  HB 7121 passed the full House but was taken up by the Senate.  SB 1032 died in the Appropriations Committee. 

Other re-entry bills--including SB 880, SB 1704 and HB 69—were not heard in committee.

Other Issues

Bills That Passed

• Local Pension Accountability (SB 534)
• Workers’ Comp Relief – Cap on Repackaged Drugs (SB 662)

Bills That Did Not Pass

• State Information Technology Governance (SB 1762 and HB 5009)
• State Pension Reform (HB 7011 and SB 1392)
• Local Government Pension Reform – Reducing Unfunded Liabilities (SB 458 and HB 1399)
• Claims Process Reform

Local Pension Accountability

SB 534 will increase the accountability of public pension plans. The bill specifies additional reporting requirements for local public pension plans and provides that local plans, which do not comply with the reporting requirements, may jeopardize their revenue sharing funds  The bill also explicitly provide that the state is not liable for any financial shortfall in a local government retirement plan. SB 534 passed.

Workers Comp Relief 

The issue of how much doctors can charge to dispense drugs in the workers’ compensation system—and the impact that has on tax rates—has been debate for a few years.  Since drugs bought in bulk by pharmacies sell for less than repackaged drugs, a cap on repackaged drug prices should result in significant savings on workers' compensation rates.  It has been estimated that this could reduced rates by 2.5% and save businesses $62 million annually.  While the original bill (SB 662) would have capped the price of repackaged drugs at the average whole sale price, but a compromise was finally reached to cap them at 112 percent of the wholesale price.  Although this will reduce the savings, it allowed the bill to pass.

State Technology Governance

The State will go at least another year without an entity that is in charge of IT strategy and business process implementation on an enterprise-wide basis, leaving a fragmented system in place that causes the inefficient use of millions of taxpayer dollars annually.  The Florida TaxWatch Government Cost Savings Task Force recommended that the Legislature establish a centralized State agency responsible for IT and business processes.   Florida TaxWatch also released a Briefing this session that concludes that a centralized IT agency policy and implementation authority would produce taxpayer cost savings while improving services to citizens by standardizing processes across all agencies (therefore removing duplications), increasing accountability, and allowing for better purchasing through economies of scale.  

Both chambers considered legislation to create a new IT agency.  SB 1762 would have created the Department of State Technology (DST) as an executive agency under the Governor.  The DST would have to develop, implement, and manage state enterprise information technology services.  The bill laid out a lengthy list of powers and duties of the new agency. DST would design, plan, develop, implement, and manage state enterprise IT and biennially develop a long-range plan for state IT resources.  Beginning January 1, 2018, DST must review and approve all IT purchases by state agencies.  The House also has a plan (HB 5009) that also creates a new agency (the Agency for State Technology), but its powers and duties would be more limited.  While these bills passed their prospective chambers and were part of the budget conference process, it was decided the House and Senate were too far apart and no conference offers were made.

The Florida Retirement System

Pension reform was another area on which the House and Senate could not agree.  The House and Senate approaches were different.  Public pension reform has been a priority of Florida TaxWatch and our Government Cost Savings Task Force. A Task Force recommendation to close the state’s defined benefit (DB) plan to new employees and place them in the defined contribution (investment) plan is also a priority of House Speaker Will Weatherford. Switching to a DC plan would better align the State’s pension system with the private sector, reduce the State’s financial liability associated with the DB plan, and generate significant savings in the long run. HB 7011 would have done this. SB 1392 would not have closed the DB plan to new employee but would have made the investment plan the default plan for employees who do not explicitly choose a plan.  The bill incentivized enrollment in the investment plan by lowering the employee contribution from three percent to two percent. It also required enrollment in the investment plan for new members of the Elected Officers Class and Senior Management Service Class.  The House approved its reform bill, but when the Senate amended it approach to the bill and sent in back, the leaders announced there was not enough time for pension reform this session.

Local Government Pension Reform

Local pension reform is also needed, as most municipal plans are below 80 percent funded and pension costs are taking a bigger and bigger bite out of city budgets. One problem is the restrictions on how a revenue source provided by the state to local governments (insurance premium taxes) may be used. In 1999, the law was amended to significantly restrict the ability of cities to bargain with police and firefighters’ unions regarding pension benefits, by guaranteeing in statute that existing “minimum standards and benefits” could not be reduced in the future. It also provided that any premium tax revenue exceeding the amount in 1997 be used only to fund additional or extra benefits for police and fire retirees only. In practice, this means that local governments are unable to use increases in premium tax revenues to cover anything other than additional extra benefits for police and firefighters. For instance, they cannot use this money to pay for—in some cases, massive—unfunded liabilities, which contributes to having local taxpayers on the hook to cover future obligations. SB 458 and HB 1399 looked to help address this by requiring that plans that are less than 80 percent funded must use 50 percent of their post-2012 increase in premium tax revenues, to pay the plans’ actuarial deficiency. The remaining portion would be split between defined contribution and base benefits. SB 458 passed the full Senate and the House had it on the Special Order Calendar, but ultimately did not take it up. HB 1399 died in the Appropriations Committee.  

Claim Bill Process

The Florida House of Representatives created a Select Committee on Claim Bills to developed recommendations for reform of the process by which persons can petition the legislature for payment of tort claims against government. The process is too arbitrary, too political and lacks equity and transparency. A Florida TaxWatch Briefing shows that the size of claims have been increasing and warns that as more high cost settlements are approved, there is likely to be a growing call for ever increasing awards. The report includes recommendations aimed at balancing peoples’ right for their claim to be heard and resolved in an expeditious manner with the taxpayer’s right to assurances that their money is not being spent capriciously and that settlements are not unnecessarily expensive.

The Select Committee’s drafted a bill that included Florida TaxWatch recommendations such as placing future medical payments in a trust, allowing local governments to pay claims through periodic payments and annuities and expediting the process for settled claims.  The centerpiece of the House plan is an attempt to incentivize local governments to buy insurance.  The caps for local government claims would be increased to $1 million per person and $1.5 million per occurrence—up from $200,000/$300,000.  These caps would also be indexed to inflation.  Claim bills would still be allowed over the caps.  However, if a local government purchases insurance for negligence at three times the cap levels, they would only have to pay the deductible and no local claim bills over the insurance limits would be allowed.  If a member wanted to bring forward a claim bill for someone injured by a local government that had the required insurance, the claim would be against the state and any payment would come from state funds.  The bill would also create a bifurcated trial where a jury rules on liability and the judge determines damages.  Florida TaxWatch agrees that increased local insurance coverage will decrease the number of claims bills brought before the legislature but warns that the significantly increased caps would increase taxpayer costs and unduly harm some local governments.

Resistance to the changes was too great and the Senate was not likely to take up claims reform, so the issue died.  Since the Senate President stated claims bills would not be heard without reform to the process, there were no individual claim bills considered either.