The Florida Legislature will begin its 60 day annual regular session of passing new laws and regulations on March 5, 2013 and conclude on May 2, 2013. The major legislative issue areas the Florida Legislature will consider in the session are highlighted below.

Budget
On January 31st, Governor Rick Scott released his proposed $74.2 billion budget. Not taking inflation into account, this would be the largest budget in state history and a nearly $8 billion increase over what he proposed a year ago. Included in this budget is a $2,500 raise for every classroom teacher in Florida, an increase in per student funding of $400, an elimination of 3,600 positions, one third of which are vacant and most of the remaining would be transferred to private contractors.

The Governor used the budget to continue his goals of strengthening the state's appeal to business by including a tax exemption for manufacturing equipment that is expected to save 17,500 businesses $140 million. The Florida Department of Transportation would receive a $917 million increase under his budget, an 11 percent increase over the current budget. Most of the money goes to the transportation work program, including $3.6 billion for highway construction, $288 million for port improvements, $160 million for rail projects, $287 million for bridge construction and repair, $766 million for land acquisition, and $525 million for road resurfacing.

In the area of environmental protection and conservation, the budget included $75 million for the Florida Forever land buying program and potentially up to $50 million for other land purchases. The budget also included $25 million for beach restoration, $19 million for state park improvements, $6 million for springs protection, and $3 million for Apalachicola River storm water projects and a flow study.

The budget included $116.3 million to cover the 30 percent of Floridians who currently qualify for Medicaid and are not enrolled but are expected to enroll by 2014. The budget complied with the mandatory areas of the Affordable Care Act, including $703.5 million for the increase in Medicaid payment rates to match Medicare rates. The Governor waited until Florida was granted its second Medicaid waiver from the Centers for Medicare & Medicaid Services to implement its managed care program to announce his support for a three year expansion of Medicaid to cover Floridians living at 138 percent of the poverty level. This three year expansion would not require any funding from the state and would allow the state to compare projected costs to actual costs.

The budget included funding to move 750 Floridians off of the waiting list for services for the developmentally disabled. Also found in the budget was funding for 700 additional medical residency positions. Other areas of  healthcare are facing cuts. Most hospitals will receive a 2 percent cut in Medicaid for patient services reimbursement rates. Epilepsy services were completely eliminated along with chiropractic and podiatric services. An additional $80 million is included for graduate medical education.

Reactions to the budget have been mixed, with Democrats accusing the Governor of pandering and Republican leaders in both Chambers questioning the value of across the board raises that are not contingent upon performance. His support of Medicaid expansion faced backlash from both the Speaker of the House and the members of his Cabinet.

Healthcare
With the Supreme Court upholding the Patient Protection and Affordable Care Act, Florida was forced to begin taking steps to implement this new law. Previous leadership blocked any preemptive preparation, so Florida has already missed several deadlines and has been forced into a federally run state exchange. In order to decide how Florida will handle these new laws, both the House and Senate have formed Select Committees to hear testimony, attempt to reach a consensus, and draft legislation. They are covering areas including market regulation, which includes what the default coverage plan will look like versus the federal plan, medical exchanges, which will become the marketplace for all plans, the financial impact upon the state, and the changes to Medicaid and the State Children's Health Insurance Program if expansion takes place. Meetings have included testimony both supporting and strongly objecting to complying with the federal law and no decisions have been made on what direction to take the state in.

The state must also make a decision soon on whether or not to expand Medicaid. Currently it covers those who live at or below the poverty level but there is an option to expand it to cover those at 138 percent of the poverty level. This would bring a large influx of new federal funds but lawmakers are uncertain if this funding will be permanent. The Governor has supported a three year expansion and it appears the Senate will follow suit. The Speaker of the House and the Cabinet have all come out strongly against this.

The Legislature decided last year that the state should move to a Diagnosis Related Group (DRG) payment system in which payment is decided per patient by diagnosis and reimburses the hospital upon discharge, regardless of the length of stay. While for-profit hospitals will benefit from this new system, safety net and teaching hospitals are set to lose a significant sum of money. The cuts are so severe, because the current DRG model they are moving towards does not take into account the wave index in different regions of the state.

Finally, the Legislature will have to address Assisted Living Facilities (ALF). After an in depth investigation by The Miami Herald exposed wide spread negligence amongst the 2,997 facilities in Florida, a reform bill was pushed last year but died at the end of Session. This year, Senator Sobel (D-Hollywood) is sponsoring SB 646 and a House bill. HB 187 is being sponsored by Representative Fasano (R-Newport Richie). SB 646 is not as stringent as last year's bill and has received mixed reactions so far. The bill clarifies ALFs' responsibilities in providing care for residents with mental health problems, provides the Agency for Health Care Administration more authority to revoke a facility’s license, and requires ALFs to inform new residents of the nature of complaints about the facility made to the state’s ALF ombudsman program.

Citizens Property Insurance
One of the most controversial battles to be fought this session involves Citizens Property Insurance (Citizens). There is a push from many Republicans to depopulate Citizens while raising the rates for the users left. While a bill has not yet been released, Senator David Simmons (R-Altamonte Springs), chair of the Senate Banking and Insurance Committee, has been drafting a reform bill. Among its major provisions will be a 5 percent annual reduction to the Florida Hurricane Catastrophe Fund for three years, disqualifying homeowners from Citizens if private insurance is available at 115 percent of the Citizens rate to them, and the ability for Office of Insurance Regulation to request up to a 24.9 percent rate increase without a public hearing (up from 14.9 percent). The bill will also statutorily require Citizens' agents to actively search for private market replacements for policyholders and remove them from Citizens if possible. Policies will not be offered to any new construction seaward of the coastal construction control line (roughly U.S. Route 1 for east coast homes) unless they are built to code-plus. Furthermore, homes valued over $300,000 would be excluded from all new policies.

This issue will be contentious and drawn out. Two prominent South Florida Republican Senators, Miguel Diaz de la Portilla (R-Miami) and Anitere Flores (R-Miami), are strong opponents of this version of reform and are largely siding with the Democratic caucus. The Senate continues to work with draft legislation while the House has yet to produce any legislation indicating their direction.

Taxation and Economic Development
The Governor used the proposed budget to continue his goals of strengthening the state's appeal to business by recommending approximately $161 million in tax exemption and relief.

Chief among his proposals is a sales tax exemption for the purchase of manufacturing equipment for all new and existing businesses that is expected to save 17,500 businesses approximately $140 million.

The Governor is also recommending an increase to the Corporate Income Tax (CIT) exemption by another $25,000, thereby increasing the number of businesses that would not pay the tax. The total CIT exemption would be raised to $75,000, an increase from the current $50,000 (which was raised from $25,000 to $50,000 last year by lawmakers). This increase in the exemption is expected to assist about 2,000 businesses and cost about $19.7 million in recurring revenue.

The Governor believes that decreasing the taxes that businesses have to pay will "create jobs for Florida's families" and allow them to boost investments in their businesses which will make the state more attractive to out-of-state businesses and propel the state's economic growth.

In addition to these business-friendly tax relief proposals by the Governor, the Florida Legislature is considering additional tax issues such as requiring the collection of the state's sales tax on sales made over the Internet to Florida customers, and to reducing the rate of the state's Communication Services Tax (CST).

The Senate Commerce & Tourism Committee acted on a bill last week that requires out-of-state retailers that conduct business over the Internet to collect and remit Florida's sales tax for sales made to Florida customers, exempt sales tax on manufacturing equipment, and clarify the CST.  SB 316 by Sens. Nancy Detert (R-Venice) and Gwen Margolis (R-Miami) was approved by the Committee on a 10-1 vote. Sales tax on Internet sales – SB 316 provides that a representative of a dealer, in addition to an agent, soliciting or transacting business in the state may cause the dealer to have nexus for mail order sales.  Under the bill, a dealer would be required to collect and remit sales tax if the dealer:

• has a physical presence, or nexus, in the state, or
• the activities conducted in Florida on behalf of the dealer are significantly associated with the dealer’s ability to establish and maintain a market in Florida.

Sales Tax Exemption for Machinery and Equipment – SB 316 expands the availability of the sales tax exemption for machinery and equipment from new or expanding businesses, to all businesses.

CST – SB 316 reduces the rate charged against the sales price of communication services from 6.65 percent to 5.65 percent, and reduces the rate charged against the sales price of direct-to-home satellite service from 10.8 percent to 9.8 percent. In addition, the bill states that a dealer of communication services may only collect a combined rate of 5.8 percent.

The Republican leadership of both Chambers of the Florida Legislature have expressed support for taxing Internet sales if it is revenue neutral, as they are opposed to raising any taxes. Therefore, this bill provides a mechanism for the Legislature to return any taxes collected as a result of this bill to Florida taxpayers in addition to the relief already provided in the bill.

The Florida Department of Revenue (DOR) would be required to develop a tracking system to determine the amount of sales tax collected by out-of-state dealers as a result of this bill. The Revenue Estimating Conference (REC) will use the information provided by DOR to determine the amount of sales taxes remitted in the previous calendar year and estimate the amount of sales taxes collected that will be expected in the following fiscal year. The Legislature is required to use the estimates to reduce taxes in an amount not less than the amount estimated by the REC, taking into account the reductions already provided for in the bill to the communication services tax and the sales tax exemption for machinery and equipment.

While the REC has not yet determined the fiscal impact of SB 316, specifically the sales tax on Internet sales, it is estimated that the rate reduction of the CST will likely cost about $151.6 million, while exemption of machinery and equipment from the sales tax would result in a $114 million impact.

The section of the bill addressing the CST would take effect on January 1, 2014; the remaining portions of the bill take effect on July 1, 2013.