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The power of experienceŠ |
February 15, 2013 |
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Is A Thaw Coming To The Office of Financial Regulation?
By Michael Underwood |
Like its sister organization, the Office of Insurance Regulation, the Florida Office of Financial Regulation ("OFR") is an autonomous state agency within the Department of Financial Services. Among many other duties, it licenses and regulates state-chartered banking, the securities industry, mortgage brokerage and lending and consumer finance.
The financial crisis in 2008 uncovered that during Florida's land boom between 2000 and 2007, OFR had allowed more than 10,000 individuals with criminal records to become licensed as mortgage professionals. The Florida Legislature reacted by sharply limiting OFR's discretion in many licensing decisions. Chapter 2009-241, Laws of Florida, for instance, required OFR to refuse a mortgage broker or mortgage lender license to anyone who ever had an equivalent license revoked in any jurisdiction. Senate Bill 644 by Senator Richter and its companion, House Bill 665 by Representative LaRosa would restore OFR's discretion in these situations.
SB 814 by Senator Brandes would liberalize Florida's distinctive laws on licensure of securities branch offices.
Florida is unique among North American jurisdictions in allowing investors to rescind otherwise lawful purchases of stocks, bonds and other investment securities when the seller of the securities had failed to obtain a license from OFR for operation of the branch office from which the product was sold. In 2000 this strict liability was softened by Chapter 2000-123, Laws of Florida, which removed the right of rescission where the seller had merely failed to renew its branch office license.
The proposed legislation would remove OFR from the process and automatically issue the branch office license on notice to OFR. Developed by the Washington-based Financial Services Institute, SB 814 would authorize OFR to seek additional information from the operator of the branch office. This, however, would add nothing to existing statutory powers of OFR and, in any event, would not interfere with automatic issuance of the branch office license.
OFR's modest legislative objective for the upcoming session, also addressed by SB 644/HB 665, is to modernize procedures for license applicants to submit fingerprints when required. As welcome as such legislation would be to Florida's financial services industry, it pales in comparison with eliminating the harsh, even absurd, results of excessive mandatory language in OFR's current statutes.
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Next week is the last interim committee week scheduled before the regular Session begins on Tuesday, March 5th. Hundreds, if not thousands, of proposed bills remain in bill drafting awaiting sponsor approval. However, committees will continue the work of considering filed bills throughout next week, positioning each chamber's priorities for the start of the formal legislative process next month.
SB 458, the local fire and police pension reform bill is one of the most controversial issues scheduled next week in the Senate Government Operations Committee. The bill requires that local governments use insurance premium tax dollars to meet the minimum benefits provisions for fire and police pensions as of March 1, 2013, and then fund the annual costs of the plans. After these two uses, if the plan is less than fully funded, then half of the remaining premium tax revenues must be used to pre-fund the plan's actuarial deficiency. Any insurance premium tax revenues remaining after these three uses must be used to fund defined contribution supplemental benefits.
Florida Retirement System Legislation
Making all new state employees hired after July 1, 2013 opt into a defined contribution 401(k) style benefit plan from a defined benefit plan is another major retirement initiative this year. The issue is a priority of both Speaker Weatherford and President Gaetz.The plan (PCG 13-01) cleared a House Governmental Operations Committee earlier this month. Skeptics of the plan want to wait for a Division of Retirement analysis, outlining costs and benefits of the switch. |
Red Light Camera Repeal Passes Committee
HB 4011 repealing placement of red light cameras narrowly cleared it's first committee of reference this week by a 10-8 vote. Opponents of the law have been fighting for repeal for several years since the laws passage in 2010, claiming that the cameras are merely a money making device for local governments, vendors, and the state. Proponents counter arguing red light cameras change driver behavior and save lives. In addition, municipalities believe this is a home rule issue and that the decision to install or not to install cameras is a local one.
One million drivers were cited for red light infractions in the 2011-2012 fiscal year. Many of the infractions include failure to stop at a red light before making a right turn.The fine for a red light traffic infraction is $158, of which the state receives $83. In the 2011-2012 fiscal year, the state received $51 million from the citations, with $43 million going to general revenue, $6.1 million going to the Health Administration Trust Fund for state certified trauma centers, and $1.9 million going to the Brain and Spinal Cord Injury Trust Fund.
The heated debate over red light cameras will continue this Session.
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Medicaid Hospital Payments
The Senate HHS Appropriations Committee heard testimony on the proposed Diagnosis Related Group (DRG) methodology for hospital inpatient services this week (Click here for meeting materials). Justin Senior, Deputy Secretary of Medicaid for the Agency for Healthcare Administration (AHCA), explained the rationale behind the methodology of the DRG model (Model 17) developed by the agency.
The final DRG model selected by AHCA is similar to current Medicare payments made to Florida hospitals. Model 17 does factor in the complexity of cases, weighting complex procedures more heavily for higher rates. There are no wage adjusters used in the base rate, so no deference was given for cost of living differences around the state. However, there is a policy adjuster for rehabilitation services. ACHA did not recommend a transition period from the current Medicaid per diem payment system to the new DRG system, set to begin on July 1, 2013.
DRG payments are determined by the number of codes on claims and it is expected that the number of codes will be higher in the first year of implementation, so AHCA has inserted a 7.5% reduction to keep DRG payments budget neutral to the state. Although, for hospitals there are winners and losers under the proposed DRG system.
Senators Thrasher and Lee, strongly urged AHCA to get together with hospital representatives and address their concerns. Both members suggested additional adjusters in the DRG model to increase payments for traditional safety net hospitals.
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Graduate Medical Education Discussion
In the same Senate HHS Appropriations meeting, the Governor's Office presented their plan to increase residency slots in Florida hospitals.
There has been a long recognized shortage of physician residency slots in Florida. We currently rank 42nd in the country for the number of residency slots. The Governor's budget increases Graduate Medical Education (GME) spending for residencies by $28 million or 700 additional slots in FY 2013-14. In the proposed plan, funding will follow the resident and all accredited hospitals would be eligible for residency funding under the plan. However, this approach may jeopardize federal funding, although Florida can submit a request with the federal Centers for Medicare and Medicaid Services for approval of a federal match for the slots. |
Campaign Finance Reform
HB 569 Florida Election Code is a top priority of Speaker Will Weatherford this Session. The bill would allow a contributor to give up to $10,000 to a candidate. The current limit is $500. In exchange for the higher contribution limit, the bill increases disclosure requirements by directing candidates to post contributions on-line within 24 hours of receipt. Some critics of the bill argued that the increased contribution amounts will greatly aid incumbents' re-election chances, citing studies which found higher contribution limits contributed to less turnover of incumbents.
HB 569 passed out of the House Ethics & Elections Subcommittee on a 10-2 vote and is now in the House Appropriations Committee.
The Senate is also working on a version of campaign finance reform led by Senator Jack Latvala (Clearwater). He is expected to have a proposal by next month. |
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