Last month, Gov. Rick
Scott went line-by-line through the state’s $74.5 billion budget, striking
down more than $350 million in spending items—everything from $10,000 for a
water project in Miami
Gardens to $50 million
for a state bike trail.
Scott said he spent a long time reviewing every item in the
400-plus-page budget to protect taxpayer money by making sure that all line
items in the budget were a smart use of state funds.
But when it comes to a unique $52 million transfer of cash
from the state-run insurance company to a nine-month-old startup private insurer, Scott
is not willing to say whether he supports the unprecedented deal or not. The
recipient of the special deal, Heritage Property and Casualty Insurance, gave
Scott's reelection campaign $110,000 in March as it was negotiating the deal. Scott’s office said
the governor did not influence state-run Citizens Property Insurance to act on
behalf of his political contributor, but his spokespeople have also avoided
saying whether Scott supports the deal itself.
Here’s an excerpt from a press conference today, in which
Scott avoids answering a reporter’s question about whether he supports the
Reporter: A couple weeks
ago, Citizens did a $52 million deal with a nine-month-old insurance company.
We know how you feel about Citizens but you haven’t really said specifically
how you feel about this unique and new type of deal. Do you support that type of economic activity at Citizens, are you against that
Scott: First off, I want
to try to do anything I can to try to reduce taxes in our state. As you know,
my first year in office we reduced property taxes by over $200 million, so I
think that’s a real positive. What Citizens is doing is, Citizens needs to make
sure they downsize. They should be the insurance company of last resort. I’ll
do anything I can to make sure they keep doing that. As you know I (appoint)
two of eight board members and I don’t appoint the chairman. I want them to
make sure they constantly look at how do we get them out of the business of
being the insurance company of first resort. I want them to be the insurance
company of last resort. That’s what
they’re set up to do and that’s what they need to do.
specifically. A couple weeks ago you went line-by-line and looked at budget
issues and vetoed things were $100,000. This is a $52 million deal, and you’re
the CEO of the state. Should you not look at this deal, specifically, and say,
‘I’m for this deal,’ or ‘I’m against this deal,’ or ‘I have issues with this
deal,’ as others have?
Scott: Citizens has a
board. I appoint two board members. I don’t appoint the chairman. My
expectation is that they go through, and any program like that, they review it.
And do the right thing.
There is a difference between the state budget and the
state-run insurer: Scott has unique
line-item authority over the budget, while his control of the state-run
property insurer is a bit more indirect. He appoints two members to the eight member
board and can give Citizens directives as the head of the Florida Cabinet. He’s
done so in the past. He also sits on the the Financial Services Commission, which oversees the Office of Insurance Regulation. OIR approved the special deal with Heritage, despite a long list of insurance violations at companies run by Heritage's president.
One of Scott’s appointees to the board made the motion to
support the Heritage deal, and voted for it in a narrow 3-2 vote. Scott’s other
appointee was not present. If Scott opposed the deal, he could have
asked his appointee not to carry it and it would have failed.
Scott’s office has not addressed this issue, only saying, in
a statement from the governor’s chief of staff: “Any assertion that our office
influenced the Heritage risk transfer decision by the Citizens Board
today is outrageous.”
Scott's chief of staff also called the board “tone-deaf in
earning public confidence” after it approved the deal.
Prior to the $52 million deal being approved, Scott’s office
tried to downplay it, calling it “not special.”
Also, the day before the “tone-deaf” charge, the governor’s
office was much less aggressive, stating: “We expect [the board] to approve or
disapprove of this risk transfer based solely on its merits.”
Scott has since said that he believes the board should give
at least seven days notice before meetings (the Heritage deal was approved in a
hastily scheduled vote, shortly after it was unveiled.). His office also said Scott will not return the $110,000 in donations from Heritage.
Scott’s non-answer on whether he supports the deal itself is
not out of character for the first-term governor.
Scott often does not answer questions directly, regularly
pivoting to well-rehearsed talking points that are often repeated in several
interviews with different news outlets. In many cases, the CEO-turned-governor
opts to defer to less powerful officials on major issues. Here’s a blogpost
we did last year documenting Scott’s deferential stance on several issues.
On property insurance, Scott is in a difficult place,
politically. The business community and insurance companies—many of whom are
major political contributors and Scott’s most steadfast supporters—want higher rates to
help boost profits and sustainability.
Meanwhile, homeowners—many of whom vote
based on pocketbook issues—have seen hundreds of millions of dollars in
insurance premium increases since Scott took office. Scott’s predecessor,
Charlie Crist, called a special session and worked to freeze property insurance
rates. He earned the ire of the business community and major insurers said
Crist forced them to flee the state. But homeowners saved millions of dollars
and, since there have been no hurricanes in seven years, the financial calamity
of an undercapitalized insurance market has not materialized.
Given the political realities (and the fact that Crist could challenge Scott in 2014), Scott has steered clear of taking a strong a
position on property insurance. He worked to kill insurance rate hikes in
a Citizens bill moving through the
Legislature this year, but also has tasked Citizens with shrinking rapidly. At Citizens, the "depopulation" mandate means raising rates and using cash from the company's $6.4 billion surplus to incentivize private insurers.
Board members at Citizens have said that the message they’re
getting from state lawmakers is “schizophrenic.”