St. Petersburg Times
By Robert Trigaux, Times Business Columnist
In Print: Thursday, January 20, 2011
Through these tough economic times, we’ve kept some hefty bills artificially low. The day to pay up is coming soon.
Big hikes in long-suppressed property insurance and electric rates, as well as in business taxes to replenish benefits for the state’s unemployed, are just around the corner.
Florida’s predicament reminds me of the Popeye comic strip character Wimpy, best known for his give-me-now, pay-you-later line: “I’ll gladly pay you Tuesday for a hamburger today.”
We’re all Wimpys. And our timing is onerous. Florida’s economy, harder hit than the nation’s, already will take years longer to revive. The coming spikes in insurance and electric bills, plus increases in business taxes, will further slow — but hopefully not derail — the rebound.
Politicians kept homeowners insurance premiums and electricity rates low on purpose in recent years to appease consumers hard hit by the severe economic downturn. But caps placed on these consumer expenses could soon be lifted.
A similar scenario looms for Florida businesses. Overwhelmed by a million-plus jobless Floridians, the state quickly drained its trust fund used to pay unemployment benefits. That forced the state to borrow more than $2 billion from the federal government to cover those benefits while promising to repay that loan and rebuild its trust fund. How? By increasing the taxes on more than 450,000 Florida businesses.
Had the state shortfall been replenished all at once, the minimum annual tax rate levied against businesses would have risen a staggering 12-fold last year. Instead, the state Legislature raised taxes slowly, postponing the day of reckoning for a few more years.
Still, Florida businesses face a 188 percent tax increase this year just to start refilling the unemployment trust fund. And interest charged by the feds on billions that Florida has already borrowed starts coming due this fall.
Insurance rates also have been kept lower than they might otherwise be. State-run Citizens Property Insurance, the largest insurer in the state, remains under restrictions that lawmakers imposed in the aftermath of the busy 2004 and 2005 hurricane seasons. Citizens cannot raise its average rates more than 10 percent a year.
Now comes new Florida Gov. Rick Scott. Scott insists that Citizens must charge rates that are actuarially sound.
That’s business lingo for saying that rates, in this case, must go way up to make sure Citizens can cover claims in the event of a major storm. That would also allow private insurance companies to raise rates and remain competitive.
Up how much? Citizens’ rates need to rise 55 percent. That means that for policyholders who currently pay $2,000 (that’s modest these days) for Citizens coverage, the new bill would climb to $3,100.
Electric rates are also due to rise. Progress Energy Florida CEO Vinny Dolan last week said that the utility had agreed to freeze electric rates through 2012, in part because Floridians were suffering through tough financial times.
But those rates have been kept artificially low and, Dolan points out, must be made up over time. Progress Energy Florida, which provides electricity to most of west central Florida, already plans next spring to request higher rates that would take effect in 2013.
Financially stressed Floridians have long sworn they would gladly pay up Tuesday for lower bills today. Well, my fellow Wimpys, guess what day it is?
Robert Trigaux can be reached at trigaux@sptimes.com.
http://www.tampabay.com/news/business/personalfinance/time-bomb-of-rising-bills-awaits-floridians/1146386
