Editorial

One of the dangers of the legislative process, and indeed the industry itself, is that money loses its conventional meaning. By that, I mean it stops becoming the dollar bills handed over to the nearest convenience store clerk for a tank full of gas, a jumbo soda, a moon pie, and lottery tickets. Instead, it becomes this abstract concept lost in some mathematical equation that most of us struggled with back in high school. Like a friend of mine once said, “I did pretty well in math until I got to algebra, and the teacher introduced 'x.'” Gold stars are available for all who can solve 2(-2x-3)+x = 4+-x+3x.

Those who follow the state's $70-billion budget process or find themselves hopelessly trapped in a room with an actuary trying to explain rates, understand that money is the “x.” It decides the outcome of the multiple calculations required to pay fixed costs, future expenses, and the potential costs of paying for a one-in-50-year hurricane.

One of the failures of government is that it never really explains how money functions at that level. Instead, the issue gets broken down into sound bites about taxes, programs, and the usual political rhetoric. This leaves the public with the false impression that there is no difference between how the state budget and household checkbooks are balanced at kitchen tables around the state.

This brings us to the $250-million question.

This year's property bill calls for another $250 million to be used to attract investors to the market. The insurance capital build-up program offers new domestic companies with matching surplus note loans of up to $25 million, which can be paid back over 20 years. First inserted into the 2006 property bill, the program has undoubtedly been successful. Thirteen companies have taken advantage of the grants, bringing $500 million in new capital into the state and funneling 1.7 million policyholders into the domestic market.

But here's the rub. The initial phase of the program was funded using general revenue dollars, which is derived mainly from the state's six percent sales tax. This year, however, lawmakers decided to take the money from Citizens. Now, many are calling for Governor Charlie Crist to veto the proposition. Once again, the Pandora's Box of the property market is reopened and the governor has to decide who pays for what and at what cost.

Looking at the situation, one can see that there are valid arguments on both sides. Those who support using Citizens' money point to safeguards such as the money can't be used if the insurer has less than $1 billion in surplus in December. Fifteen percent of a new company's premiums must come from Citizens during the first three years of the program. Critics, however, argue that once the money is transferred, it is not coming back. Moreover, with the insurer's rates frozen at least until January 2010, there is no way to recoup it. Besides, the number of Citizens' policyholders has remained constant.

So which way should the issue fall? Should Citizens' surplus be used to provide investors with a cheap form of money in hope of solidifying the domestic market? Or is it fiscally irresponsible to pull money out of the state's largest insurer and potentially increase the assessment burden on all homeowners? One way or another, someone has to pay the x factor. Either way, it's your tab.