Building on Previous Success

106 N. Bronough Street º Tallahassee, FL 32301 º www.FloridaTaxWatch.org º Phone: (850) 222-5052 º Fax: (850) 222-7476

Building Upon a Track Record of Success
The Task Force Will Build Upon the Success of the FY 2010‐11 Report and Recommendations of the Florida TaxWatch Government Cost Savings Task Force to Save More Than $3 Billion

In order to assist the state’s elected officials address the fiscal crisis, and for the benefit of Florida’s taxpayers, citizens, and visitors, the Florida TaxWatch Government Cost Savings Task Force for FY 2010‐11 provided specific recommendations to help reduce state government operating expenditures, increase productivity, and maximize state revenue collections in the report titled the Report and Recommendations of the Florida TaxWatch Government Cost Savings Task Force to Save More Than $3 Billion. This report details 88 well‐researched, quantified recommendations designed to reduce operational and administrative spending in order to provide immediately actionable cost‐savings within the next fiscal year without cutting core programs and services. In total, all of the 88 recommendations, if implemented, would save the state more than $3.2 billion within the fiscal year.

The final recommendations were widely welcomed by the media and the Task Force received coverage in more than two hundred articles in local, state, and national newspapers as well as dozens of editorials published about the report and its cost‐savings recommendations.

At the close of the FY 2010‐11 legislative session, more than $1.1 billion worth of recommendations have been implemented in legislation or as part of the FY 2010‐11 Budget. Twenty‐seven, or more than one third, of the Task Force recommendations were enacted by the Legislature. These recommendations include the relaxation of the Class Size Amendment, the expansion of the Florida Tax Credit Scholarship, reduction of exemptions from competitive bidding, the increased use of electronic payment disbursements and receipts, the reduction of Medicaid fraud, and the creation of a temporary Tax Amnesty program.

Cost-Savings Legislation from FY 2010‐11:

Class Size Amendment – The Legislature is sending a proposed constitutional amendment to the voters to change the 2002 class size amendment to provide greater flexibility to school districts and save approximately $350 million. Under the current amendment, individual class sizes would be limited to 18 students through third grade, 22 students in grades fourth through eight, and 25 students in high school. The rewrite would soften the standard by limiting the school wide average class size to those totals, but allows individual classes to go as high as 21, 27, and 30 students, respectively. This Florida TaxWatch supported amendment will go to the voters in November 2010.

Florida Tax Credit Scholarship – SB 2126 will expand the Florida Tax Credit Scholarship, a program that gives businesses a tax credit in exchange for paying for a scholarship. The bill adds new tax sources that are available for the credit, increases the total amount of scholarship money that can be awarded. It also expands the income eligibility for students and increases the per‐student award gradually. It also adds important accountability provisions for private schools. Florida TaxWatch research on the scholarship program was cited several times on the floor. That research has found that in addition to increasing school choice, the savings from reducing the number of public school students will more than offset the tax credits.

Cap Bright Futures Scholarships – The Legislature reduced the future cost of Bright Futures, through steps including increasing test score requirements to qualify for the program, reducing the number of credits covered, and reducing the time of utilizing the award from 7 years to 5 years.

Reduce Exemptions from Competitive Bidding – SB 2386 removes certain types of services from the list of services exempted from competitive bidding requirements, including auditing services, academic program reviews, health services, and Medicaid services.

Increase use of electronic payment disbursements and receipts – SB 2386 directs all agencies and the judicial branch to use electronic payment disbursement and receipts for all state payments where possible.

Improve Enforcement of the Preferred Pricing Clause – SB 2386 requires each state agency to review its contracts to determine if each contractor complies with the applicable preferred pricing clause. Contracts, which include a preferred‐pricing clause and were executed, renewed, extended, or modified on or after July 1, 2010, must require an affidavit by the contractor attesting that the contract is in compliance with the preferred pricing clause.

Renegotiate Non‐Client‐Service Contracts – SB 2386 requires each state agency to review and renegotiate existing contracts renewals to reduce contract payments by 3 percent.

Ensure only eligible dependents receive health insurance – SB 2374 directs the Division of State Group Insurance to competitively procure dependent eligibility verification services. Based on information from the Department of Management Services and the experience of other states, Florida TaxWatch estimates such an eligibility audit could save as much as $30 million.

Reduce Corporate Filing Fees but Stop Waiving Late Penalties – HB 5505 removes a provision that results in the Department of State routinely waiving the supplemental corporate late fee, making the fee mandatory. It is estimated to bring in an additional $16.8 million for the new budget.

Reducing Medicaid Fraud – SB 1484 includes a major fraud reduction initiative – the Medicaid and Public Assistance Fraud Strike Force Act. The bill would add additional staff to the Chief Financial Officer’s (CFO) office and create a Fraud Strike Force to pursue Medicaid and public assistance fraud. It also directs the state to enter into a contract with third‐party vendors to provide a real time, front‐end database to decrease inaccurate payment to Medicaid providers and improve the overall efficiency of the Medicaid claims‐processing system. It also requires a thorough review of the state’s fraud processes.

Tax Amnesty – HB 5801 creates a three‐month Tax Amnesty program from July through September 2010. This amnesty will provide taxpayers the opportunity to pay overdue taxes without late penalties, with reduced interest charges, and with avoidance of criminal prosecution. The Revenue Estimating Conference estimates it will bring in $82.9 million.

Adding Department of Revenue Tax Auditors to Increase Tax Compliance – HB 5801 also provides 25 new auditors to the Department of Revenue (DOR).

Reducing Textbook Costs – HB 5101 requires that instructional materials adopted after 2012‐13 be adopted in an electronic format.

Reducing office supply costs – The budget implementing bill (HB 5103) provides for office supplies to be competitively procured through a multiple vendor state term contract.

Automated Verification System of Child Care Providers – The Task Force recommended a point‐of‐sale verification system, rather than the current self‐reporting system, to verify attendance and cut down of fraudulent child care claims. SB 2014 requires the Agency for Workforce Innovation, which houses the state’s subsidized child care program, to establish a single statewide information system to track child attendance, among other things.

Reducing Pension Costs – HB 1307 reduces the Florida Retirement System contribution rate for administrative costs that is paid by employers. This will save the state $4.2 million.

Financial Institution Data Match – HB 7157 will allow DOR to do electronic data matching with financial institutions for those taxpayers that already have tax liens in the public record for matching and recovery of funds owed to the State of Florida. Any financial records obtained may be disclosed only for the purpose of enforcing the tax laws.

Require All State Employees to Contribute to their Health Insurance – While most state employees contribute to the cost of their health insurance, more than 25,000 employees, including legislators, do not. The Legislature eliminated the free health care coverage by requiring them to pay $100 a year for individual coverage and $360 a year for family coverage.

Increase the Number of Lottery Selling Points – Both the House and Senate budgets provide authority to acquire up to 500 additional ticket terminals to increase the size of the retail network. The budgets also would provide $3.9 million to purchase 750 automated vending machines.

Expand the Redirection Program – The Legislature added $1.6 million to the Redirection Program in conference to maintain the expansion that was funded last year. Also, the Agency for Health Care Administration was given authority to seek a waiver to provide mental health services to juveniles in the program.

Maximize Lease Space – The budget contains proviso that holds Master Lease Space Improvement Funds in reserve until the Department of Management Services provides a report detailing the projects and their justification.

Promote Alternatives to Incarceration and Reduce Recidivism – The budget authorizes the Department of Corrections to contract to implement an risk/needs analysis pilot program to focus treatment and services on those most likely to re‐offend and to determine alternatives to incarceration for low risk inmates.

Promote Alternatives to Incarceration – The budget also provides funding for pilot programs for offenders who would be sentenced to prison but could be diverted to other programs. The budget also authorizes the Department of Juvenile Justice to contract for services to divert youth from secure detention to alternative community based services.

Outsource Recovery of Aberrant Medicaid Claims – The Senate budget authorizes contracting out on a contingency basis for post‐audit claims analyses to identify and recover Medicaid overpayments.

Purchasing – The budget requires a business case plan for the competitive solicitation of the state purchasing system, MyFloridaMarketPlace, by July 1, 2010. Upon approval of the business case plan by the Legislative Budget Commission, a contract will be competitively solicited.

Prior to the Government Cost Savings Task Force for FY 2010‐11, Florida TaxWatch released 42 specific recommendations to help reduce state government operating expenditures, increase productivity, and maximize state revenue collections in the report titled Constructive Ideas to Help Florida Address the Budget Shortfall in January 2009. The implementation of these recommendations had the potential to generate more than $2.5 billion in added value for the taxpayers. In addressing the projected FY 2008‐09 budget shortfall during the January Special Session, the Florida Legislature included many of the 42 recommendations proposed by Florida TaxWatch. The major vehicle for implementing these recommendations during the Special Session was SB 44A. The recommendations included in the bill are potentially worth more than $1 billion in added value in the long‐term if fully implemented. The bill was passed unanimously by both the House and the Senate.

Specifically, the bill directs:

• Each state agency to renegotiate existing and proposed contracts to achieve substantial savings where possible
• Office of Program Policy Analysis and Government Accountability (OPPAGA), in consultation with the Department of Management Services (DMS), to “develop recommendations regarding the prudent issuance and use of state‐owned wireless communications devices
• DMS to produce a list of all “state‐owned surplus real property” worth more $1,000 to determine the “potential cost savings and revenue opportunities” from their sale or lease
• the Office of the Chief Financial Officer to “consider methods to ensure that state agencies receive the maximum amount of federal funds” to which the stat is entitled, and directs each agency to “review its operations” to ensure maximum collections
• OPPAGA to examine the option of contracting a private entity to identify and recover fraudulent Medicaid claims on a contingency basis
• OPPAGA to examine the option of expanding the use of alternative inmate placements for low‐risk inmates

Praise for SB 44A and the Florida TaxWatch recommendations was widespread and bipartisan. During debate preceding final passage of the bill in the House, Representative Lotts‐Sachs said “This is the best way to handle our budget shortfall.” Exemplifying the bipartisanship of the implementation of the TaxWatch recommendations, Representative Taylor complimented the House Republicans for supporting SB 44A by saying; “Sometimes we find common ground and this is one of these times.”

In addition to SB 44A, SB 2A (the part of the budget balancing package that contains the specific dollar amounts) also reflected some TaxWatch recommendations, specifically:

• An $80 million reduction in spending on class size reduction
• The negotiation of leases in the Department of Corrections
• Increasing correctional work release

Furthermore, SB 6A increased flexibility for school districts to allocate resources, which will allow for the implementation of Florida TaxWatch three additional recommendations: delaying the purchase of certain new textbooks, slowing the implementation of additional requirements consistent with the class size reduction amendment, and allowing the districts to redirect money from non‐instructional functions to the classrooms.

Additionally, SB 8A implemented the Florida TaxWatch recommendation to establish a Healthcare Provider Services Assessment on nursing homes. This industry‐supported fee will increase net revenue to nursing homes by increasing the draw‐down of federal funds, allowing nursing homes to avoid cuts.

In furtherance of the Florida TaxWatch mission, and building upon the success of the cost‐savings efforts earlier this year, Florida TaxWatch now organizes the Government Cost Savings Task Force for FY 2011‐12. The Government Cost‐Savings Task Force for FY 2011‐12 is greater in both scale and scope than the previous effort and could lead to further advances in making Florida government more efficient and increasing savings for taxpayers. The successful results of these previous reports suggest that further study and analysis could generate even greater savings for Florida and its taxpayers.