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H E C A B I N E T
APPEARANCES:
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2 (The agenda items commenced at 9:37 a.m.) 3 GOVERNOR BUSH: Board of Trustees. 4 Secretary Struhs, good morning. 5 MR. STRUHS: Good morning. 6 GOVERNOR BUSH: Long time -- 7 MR. STRUHS: Good. 8 GOVERNOR BUSH: -- no see. 9 MR. STRUHS: Yes, sir. 10 We've only got four items this morning. 11 The first one is a couple of utility 12 easements for the Florida Gas Transmission 13 Company. 14 You may recall a number of months ago, you 15 granted a number of easements across State 16 properties. This is one that was missed. 17 It's in two phases. The first one is a 18 1.22 acre easement for construction, which will 19 later be expanded to a 1.5 acre easement. 20 That includes all of the necessary 21 buffer zones for safety factors for the 22 pipeline. 23 We're recommending approval. 24 ATTORNEY GENERAL BUTTERWORTH: Move the 25 item, Governor. ACCURATE
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2 COMPTROLLER MILLIGAN: Second. 3 GOVERNOR BUSH: Moved and seconded. 4 Without ob-- 5 TREASURER GALLAGHER: Subject to -- 6 GOVERNOR BUSH: Subject to receipt of an 7 appraisal acceptable to DEP's Bureau of 8 Appraisal. 9 TREASURER GALLAGHER: Second. 10 GOVERNOR BUSH: Moved and seconded with 11 that caveat. 12 Without objection, it's approved. 13 MR. STRUHS: Item 2 is an option agreement 14 to acquire nearly 250 acres between the 15 Wekiva-Ocala Greenway. It's a Florida Forever 16 project. 17 This is I think a good example of 18 strategically acquiring some land that provides 19 connectivity between existing State and Federal 20 resources. You've got Wekiva Springs State 21 Park, Rock Springs Run State Park, the 22 Lower Wekiva River State Reserve, 23 Hontoon Island State Park, and the 24 Ocala National Forest. 25 What this does is it helps link all those ACCURATE
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2 good utilization of the Florida Forever 3 resources. 4 We're recommending approval of this item. 5 GOVERNOR BUSH: Is there a motion? 6 TREASURER GALLAGHER: Motion. 7 GOVERNOR BUSH: Moved -- 8 COMMISSIONER CRIST: Second. 9 GOVERNOR BUSH: -- and seconded. 10 Without objection, it's approved. 11 MR. STRUHS: Item 3 is an option agreement 12 to acquire 354 acres within the Lake Wales 13 Ridge Ecosystem. 14 Many of you will recall that this project I 15 think is the highest ranking -- or certainly 16 one of the highest ranking projects that we've 17 got in the Florida Forever program. It's a 18 very unique ecosystem with a number of plant 19 and animal species found only in this location, 20 nowhere else in the world. 21 We were able to acquire this property at 22 93 percent of the approved value. 23 And we're recommending approval. 24 TREASURER GALLAGHER: Motion. 25 ATTORNEY GENERAL BUTTERWORTH: Second. ACCURATE
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2 Without objection, it's approved. 3 MR. STRUHS: Item 4 is an unusual item. 4 It is a statutory requirement that two 5 members be selected from a slate presented to 6 you by the eleven current members of the 7 Citizens Advisory Board, which is advising the 8 Fish and Wildlife Commission as they develop a 9 management plan for Fisheating Creek. 10 Just point of -- of -- of information. 11 There are actually two different requirements. 12 One is a statutory requirement to establish 13 this group, and that's the decision before you 14 today. 15 At the same time, the Settlement Agreement 16 that was achieved a year ago -- or two years 17 ago now, largely with General Butterworth's 18 leadership, creates a separate advisory panel 19 for purposes of compliance with that 20 Settlement Agreement. 21 Staff has worked to make sure that we don't 22 create two competing organizations, but the 23 fact that they are merged and -- and -- and are 24 integrated. 25 I think you have ballots prepared. Amongst ACCURATE
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2 Dr. Freidman, Mr. Ramunni for the 3 Concerned Citizen category; Ms. Anderson, 4 Mr. Fuller, Mr. Gray, and Ms. Powell for the 5 Environmental Group category. 6 GOVERNOR BUSH: This is the new ballot. 7 This is where we use the optical scanning 8 device, I guess? 9 SECRETARY HARRIS: You've got two. So -- 10 GOVERNOR BUSH: No touch screens. 11 MS. CASTILLE: You have two, just in case 12 we have a tie. 13 TREASURER GALLAGHER: How do we have a 14 tie -- 15 GOVERNOR BUSH: How do we have a tie with 16 seven people? 17 MS. CASTILLE: Three, three, and one. 18 GOVERNOR BUSH: Someone abstains? 19 Oh, that's right. 20 ATTORNEY GENERAL BUTTERWORTH: It takes a 21 majority vote now, Governor. 22 GOVERNOR BUSH: It takes a majority vote. 23 Well, I've never done this before. 24 Oh, there's no second runoff. 25 COMPTROLLER MILLIGAN: Yeah. There's no ACCURATE
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2 SECRETARY HARRIS: You have a chad, or 3 circle both -- name -- or you can check -- 4 ATTORNEY GENERAL BUTTERWORTH: Do you have 5 a dangling chad or -- 6 GOVERNOR BUSH: No chads. 7 SECRETARY HARRIS: You can underline them, 8 according to the new rules. 9 GOVERNOR BUSH: Gone forever. 10 TREASURER GALLAGHER: Do you have to fill 11 in the whole circle? 12 GOVERNOR BUSH: You're going to have to go 13 to California if you want to do a chad. 14 (Discussion off the record.) 15 GOVERNOR BUSH: We have a -- 16 Dr. Harris Freidman and Mr. Paul Gray were 17 the -- came out victorious. 18 MR. STRUHS: Thank you very much. That's 19 our last item. 20 GOVERNOR BUSH: Thank you. 21 If anyone wants to validate the votes, talk 22 to Ms. Castille. 23 (The Board of Trustees of the Internal 24 Improvement Trust Fund Agenda was concluded.) 25 * * * ACCURATE
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2 Administration. 3 Tom, how are you doing? 4 MR. HERNDON: Good, Governor, thank you. 5 How are you? 6 TREASURER GALLAGHER: Motion on the 7 minutes. 8 GOVERNOR BUSH: There's a motion on the 9 minutes. 10 COMPTROLLER MILLIGAN: And I'll second 11 them. 12 (Attorney General Butterworth exited the 13 room.) 14 GOVERNOR BUSH: Moved and seconded. 15 Without objection, it's approved. 16 Item 2. 17 MR. HERNDON: Item Number 2 is a fiscal 18 determination of an amount not exceeding 19 twelve million seven hundred and 20 eighty thousand dollar tax exempt, and 21 2.7 billion dollar taxable -- 22 (Commissioner Crist and Secretary Harris 23 exited the room.) 24 MR. HERNDON: -- Florida Housing Finance 25 Corporation for Westminster Apartments in ACCURATE
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2 COMPTROLLER MILLIGAN: Move Item 2. 3 TREASURER GALLAGHER: Second. 4 GOVERNOR BUSH: Moved and seconded. 5 (Commissioner Bronson exited the room.) 6 GOVERNOR BUSH: Without objection, it's 7 approved. 8 MR. HERNDON: Item Number 3 is approval of 9 a fiscal determination of an amount -- an 10 amount not exceeding fifteen million 11 five hundred and twenty-four thousand 12 tax exempt, and three million one hundred and 13 seventy-nine thousand dollar taxable, Florida 14 Housing Finance Corporation Housing Revenue 15 Bonds for Walden Park Apartments in 16 Osceola County. 17 COMPTROLLER MILLIGAN: Move Item 3. 18 TREASURER GALLAGHER: Second. 19 GOVERNOR BUSH: Moved and seconded. 20 Without objection, it's approved. 21 MR. HERNDON: Item Number 4 is approval of 22 a fiscal determination of an amount not 23 exceeding ten million three hundred and seventy 24 thousand dollar tax exempt, and six million 25 five hundred and eighty-three thousand dollar ACCURATE
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2 Housing Revenue Bonds for Noah's Landing 3 Apartments in Collier County. 4 TREASURER GALLAGHER: Move Item 4. 5 COMPTROLLER MILLIGAN: Second. 6 GOVERNOR BUSH: Moved and seconded. 7 Without objection, it's approved. 8 MR. HERNDON: Item Number 5 brings us back 9 now somewhat full circle I guess to picking up 10 on the bundled provider selection process. 11 As you'll recall, back in August when we 12 last brought to you recommendations on this 13 subject, you, in effect, remanded them back 14 to -- to the committee, and to the drawing 15 boards. 16 And we have gone through a resubmission 17 process by the various vendors who continue to 18 maintain an interest in participating in this 19 program. They have resubmitted all of their 20 materials. The information was rescored by 21 Mercer, our consultants, in this regard. 22 And last week, we brought the results of 23 those rescored outcomes to the Advisory 24 Council -- to actually both Advisory Councils. 25 And both Advisory Councils met and had a -- ACCURATE
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2 portion of the day, as a matter of fact, and 3 ultimately resolved the -- a couple of things, 4 Governor, if you don't mind. 5 And -- and -- 6 GOVERNOR BUSH: No. Just -- 7 MR. HERNDON: -- one, they said, 8 number one, they -- they were very mindful of 9 the issues that Commissioner Gallagher and you 10 and the General brought up last time about full 11 disclosure of fees, and duplication of 12 recordkeeping, and -- and withdrawal penalties, 13 and so forth. 14 But having said that, they did not think it 15 was appropriate to knock anybody out of the 16 running solely on that basis at this particular 17 time. 18 So they commended to you that -- that, 19 in effect, all of the companies be evaluated 20 in -- in spite of perhaps issues in those -- in 21 those three -- 22 GOVERNOR BUSH: Does that get to the -- 23 MR. HERNDON: -- policy -- 24 GOVERNOR BUSH: -- argument of -- of 25 companies' confidential pricing strategies, or ACCURATE
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2 MR. HERNDON: That -- 3 GOVERNOR BUSH: -- reason was for -- 4 MR. HERNDON: That is, in part -- 5 GOVERNOR BUSH: -- some of the companies 6 not wanting to -- 7 TREASURER GALLAGHER: Well, if -- everybody 8 would like to do that, some chose not to -- 9 GOVERNOR BUSH: Right. 10 TREASURER GALLAGHER: -- some chose to. So 11 I think someday somebody's going to suffer 12 because of it. 13 MR. HERNDON: And it clearly is the case in 14 some instances where companies' products and 15 services are not necessarily separately priced. 16 They have provided us with good faith 17 estimates, but they're not necessarily marketed 18 or priced in that fashion. 19 The Council members also were very mindful 20 of the Trustees' interest in the possibility of 21 collapsing some categories, but said as well 22 that they thought that the three categories 23 should continue to stand alone for the present 24 time. 25 They are going to receive a good bit more ACCURATE
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2 subsequent phase of the evaluation, there will 3 be collapsing of some of the categories so 4 they'll be able to see them as they see fit, 5 and -- and format it in various ways. 6 So -- 7 GOVERNOR BUSH: Well, there's only three 8 categories. 9 MR. HERNDON: There's only three. 10 GOVERNOR BUSH: How do you collapse more 11 than two different ways? 12 MR. HERNDON: Well, they were interested, 13 particularly, and I think it was one of the 14 issues that the Trustees also mentioned, was 15 the issue about collapsing the moderate service 16 and full service categories down into one. 17 We're going to provide the -- you and the 18 Advisory Councils with that information as a 19 means of looking at the companies in that 20 format. 21 But the Advisory Council said for the 22 purposes of making decisions at this point, 23 don't artificially collapse them, keep them 24 separate for the time being. 25 TREASURER GALLAGHER: I think the issue -- ACCURATE
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2 significant service and moderate service, the 3 difference between those two -- and correct me 4 if I'm wrong, Tom -- is duplicative 5 recordkeeping. When we're already going to be 6 doing it, they're going to do it, too. 7 So if -- if that -- if you have them remove 8 their cost of recordkeeping, they would be 9 really in a moderate service. And is there -- 10 most of them would admit that -- that it's 11 not -- probably not worth keeping two sets of 12 records. I'm sure some would say it's very 13 important to, but I think that's the reason. 14 MR. HERNDON: That's correct. 15 GOVERNOR BUSH: Is the -- is the IAC and 16 the PEORP going to come -- they're going to 17 have one more meeting between -- 18 MR. HERNDON: Yes, sir. 19 GOVERNOR BUSH: -- this meeting, and our 20 final meeting? 21 MR. HERNDON: Yes, sir. 22 They -- 23 GOVERNOR BUSH: Are they going to make a 24 recommendation on something? 25 MR. HERNDON: They are, in fact, scheduled ACCURATE
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2 joint meeting. And we're going to provide them 3 with a -- a full range of evaluation materials, 4 at the same time, sending that information 5 along to you and your staff. And hopefully 6 they'll come up with a recommendation. 7 But -- but the essence of their meeting 8 last week was to recommend that the top three 9 finalists in each service category be selected 10 as the finalist from which to choose. 11 They also had a caveat with respect to 12 Prudential. Prudential has two proposals in 13 one category, and they indicated a -- a desire 14 to have Prudential pick one of the two to go 15 forward. 16 So that list of possible finalists is 17 contained in the recommendation. And it would 18 be in the no services category, Prudential, 19 Fidelity, and INVESCO; and a moderate services 20 category, as I indicated, Prudential 1 and 2, 21 SunAmerica, Fidelity. And then as you'll 22 recall, and we've discussed previously, we had 23 both ING Aetna and Nationwide as previous 24 finalists. 25 And the motion was also made at the IAC ACCURATE
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2 well. 3 And then in the significant services 4 category, Fidelity, VALIC, and TIAA-CREF. 5 GOVERNOR BUSH: Tom, why is there -- in the 6 scoring, the significant service proposals 7 scored significantly lower than the moderate 8 service proposals. Is that an apple to apple 9 comparison, or an apple to orange comparison, 10 or -- 11 MR. HERNDON: To a degree, it's a -- 12 GOVERNOR BUSH: -- fee simple -- 13 MR. HERNDON: I'm sorry. 14 To a degree, it's an apples to orange 15 comparison. They are scored relative to each 16 other in the category, not necessarily across 17 categories. 18 GOVERNOR BUSH: So if we wanted to look at 19 collapsing, which I think sounded to me like 20 that was discussed, and -- and may be a 21 recommendation later on, it would be 22 inappropriate then to look at these scores in a 23 collapsed fashion, and say, if you rank them 24 that way, the ones that have -- are providing 25 the significant services have a lower score, ACCURATE
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2 process we've gone through are not ranked as 3 high? 4 MR. HERNDON: At this particular time, it 5 would be inappropriate to arrive at that 6 conclusion. 7 GOVERNOR BUSH: Would you res-- 8 MR. HERNDON: You do -- 9 GOVERNOR BUSH: -- would you rescore them 10 if you collapsed them? 11 TREASURER GALLAGHER: I -- I think you'd 12 have to have those that provide significant 13 service, have the opportunity to remove the 14 amount that makes them significant, as opposed 15 to moderate. 16 MR. HERNDON: That's right. 17 TREASURER GALLAGHER: And then score them 18 as a moderate. 19 MR. HERNDON: That's right. 20 GOVERNOR BUSH: So -- 21 MR. HERNDON: And that's essentially what 22 we're going to do in this next and final phase, 23 is give the Advisory Council members, and you, 24 re-- reshot analyses that take out some of 25 these services so that you are looking at ACCURATE
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2 TREASURER GALLAGHER: Now, do you have that 3 breakout number already, or is that something 4 they're going to have to give you? 5 MR. HERNDON: That's something we're 6 working on. We -- we have received it from 7 many, if not all, of the companies. 8 There are a couple of organizations where 9 that information is not available, or 10 potentially not likely to be available, and so 11 that may pose a problem ultimately. 12 But we'll -- we'll see about that. I'm -- 13 I'm just not sure at this point. 14 TREASURER GALLAGHER: Well, if -- I -- I'm 15 just wondering if somebody can pick out what 16 number they want removed as a cost factor -- 17 MR. HERNDON: We asked -- 18 TREASURER GALLAGHER: -- that might affect 19 the ones that don't get a chance to change 20 their cost factors. 21 MR. HERNDON: Right. 22 We've asked all of the vendors at every 23 stage in this process -- and I think as a 24 matter of fact, you were perhaps the one that 25 was the most pointed on this issue before -- ACCURATE
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2 MR. HERNDON: -- to be sure and break out 3 the costs. 4 We do have that information for all the 5 vendors. However, in some cases, it's good 6 faith estimates; in some cases, it's a pretty 7 accurate accounting driven outcome. 8 We do have a couple of instances where they 9 simply were not able to provide the 10 information, and that is potentially a problem 11 for the vendor, and for the selection process. 12 But -- 13 TREASURER GALLAGHER: But from day 1, not 14 just the second round, that's always been part 15 of the RFP, isn't it -- 16 MR. HERNDON: Yes, sir. 17 TREASURER GALLAGHER: -- break out the 18 costs? 19 MR. HERNDON: That's always been the case. 20 TREASURER GALLAGHER: So nothing new. 21 MR. HERNDON: Nothing new. 22 TREASURER GALLAGHER: From day 1. 23 MR. HERNDON: That's correct. 24 GOVERNOR BUSH: General? 25 COMPTROLLER MILLIGAN: Tom, are you ACCURATE
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2 MR. HERNDON: Well, I was going to mention 3 that, General. 4 In fact, we do have a -- a letter -- 5 I guess it's fair to describe it as an intent 6 to protest by Horace Mann, and a letter of 7 protest by SAFECO, which were received 8 yesterday. The SAFECO people are here, and you 9 may wish to hear from them. 10 And the Mercer folks are also here today, 11 our consultants, if you want to get into the 12 rescoring process and -- and all of that. I 13 don't want to preempt anybody at all in -- in 14 that respect. 15 It's a -- at your pleasure at this point. 16 We'd be happy to -- 17 COMPTROLLER MILLIGAN: Well, it would seem 18 to me that you ought to be given the 19 opportunity to deal with the protest before we 20 hear any of the arguments, pro or con. 21 So I -- my recommendation would be to allow 22 the -- if there are protests, to allow them to 23 go through your process. 24 MR. HERNDON: Okay. 25 COMPTROLLER MILLIGAN: And -- and then ACCURATE
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2 GOVERNOR BUSH: How -- how do they know if 3 they're going to pro-- they won't protest if 4 they -- if they make the cut. I mean -- 5 MR. HERNDON: That's correct. 6 GOVERNOR BUSH: So we should make our 7 decision and then allow them to protest, is 8 that what you're saying? 9 COMPTROLLER MILLIGAN: Essentially, that's 10 correct. 11 MR. HERNDON: Yes, sir. 12 You do have a number of people who would 13 like to speak if you're prepared to go ahead 14 and do that. 15 GOVERNOR BUSH: Is anybody prepared to -- 16 to -- one of the questions -- and pregnant 17 question at this -- consumes all the oxygen in 18 this room is how many bundled providers are we 19 thinking about? 20 Because that -- that'd solve a lot of these 21 issues if -- 22 TREASURER GALLAGHER: You trying to get 23 right to the point, Governor? 24 GOVERNOR BUSH: Well, I mean, there's a 25 lot -- a lot of -- a lot of high paid people ACCURATE
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2 COMPTROLLER MILLIGAN: Is that -- 3 GOVERNOR BUSH: -- waiting for another 4 couple weeks -- 5 COMPTROLLER MILLIGAN: -- the same people? 6 GOVERNOR BUSH: Huh? 7 COMPTROLLER MILLIGAN: We're not part of 8 the high paid people, are we? 9 GOVERNOR BUSH: No, we're not. 10 It's all relative. 11 TREASURER GALLAGHER: Compare us to out 12 there, I can tell you, there -- 13 GOVERNOR BUSH: It's all relative. 14 But let -- I mean, the point is, if -- if 15 at some point someone's going to have to kind 16 of do the secret squirrel -- you know -- we're 17 going to have to get to that point. 18 Are we going to wait till the very end? 19 Because it'll -- it'll -- you're going to 20 eliminate some of the issues of protest I think 21 at some point. 22 TREASURER GALLAGHER: I -- I think you'll 23 only cause more protests as soon as you say 24 there's going to be -- 25 GOVERNOR BUSH: Well, I don't know. You're ACCURATE
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2 till the end, which is -- my concern is if it 3 is -- delay this, to make sure that -- we have 4 a tumultuous market right now, and this is a 5 very important experiment, since it's so large. 6 And I think we've just got to get -- get it 7 right. And delay right now probably doesn't 8 help. 9 So I guess no one else wants to do it. 10 Go ahead. Let's move forward. 11 COMPTROLLER MILLIGAN: Frankly, Governor, 12 I'm just not ready to personally -- my -- 13 GOVERNOR BUSH: That's why I asked. 14 COMPTROLLER MILLIGAN: -- at the 15 institutional products that will be provided 16 versus in the -- any bundled products. 17 I'm just not ready to make that decision 18 tradeoff. Because that's really what we're 19 talking about. 20 GOVERNOR BUSH: That's right. I just 21 wanted to ask. Just wanted to -- 22 TREASURER GALLAGHER: And I don't know 23 that -- as least if we've got protests, I'd 24 just as soon get them behind us before we go to 25 the next step. ACCURATE
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2 it be completed by then? 3 MR. HERNDON: The selection process? 4 GOVERNOR BUSH: The protests between now 5 and two weeks, depending on what we do here. 6 MR. HERNDON: Well, the only one that we 7 have thus far is SAFECO who's formally notified 8 us of their protests. 9 And it may be that we can address some of 10 the concerns that they have, along the lines 11 that the General has suggested in the -- in the 12 discussion phase that is contemplated in 13 this -- in these protests. 14 We do think we have rebuttable points to 15 their concerns. I don't know whether it'll 16 satisfy them or not. That's a different issue 17 altogether. 18 But we're certainly prepared to talk to 19 them, or you can hear them this morning. 20 I think Mr. Cohen is here from SAFECO, who 21 indicated in their letter of protest pretty 22 much what their concerns were. 23 COMPTROLLER MILLIGAN: -- the domino 24 business. And I think they've come forward 25 with the recommendation nine, plus two that ACCURATE
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2 And I say, let it run its course as it 3 would in -- in a normal protest process. 4 GOVERNOR BUSH: All right. 5 TREASURER GALLAGHER: So -- so I 6 understand, are we giving instructions, or just 7 sort of letting it flow along? 8 I mean, is the instructions to take the 9 staff recommendation, and have them continue? 10 Or are we just sitting back and letting them do 11 what -- 12 COMPTROLLER MILLIGAN: No. I think they've 13 come forward with a recommendation, we either 14 accept it or don't accept it. 15 If we accept it, then one presumes that 16 there will be some potential protests at least, 17 and one I guess you already have, and -- and 18 they will be dealt with. 19 And if necessary, or if appropriate, I 20 suspect you would come back to us with a -- a 21 recommendation if it said -- 22 MR. HERNDON: Yes, sir. 23 COMPTROLLER MILLIGAN: -- don't add or -- 24 or -- or add. 25 So I -- I mean, we can, you know, listen to ACCURATE
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2 thing and -- and approve the -- the eleven that 3 we're going to look at right now. 4 TREASURER GALLAGHER: Do we give the people 5 that want to protest an opportunity to talk to 6 us, or we just -- 7 GOVERNOR BUSH: And others. I mean, I -- 8 I assume people may have -- 9 MR. HERNDON: There are some others. 10 COMPTROLLER MILLIGAN: Any -- anybody wants 11 to talk, can talk. 12 GOVERNOR BUSH: Why don't we ask -- 13 TREASURER GALLAGHER: I'd sort of like to 14 give anybody at least -- I mean, they may not 15 have another chance if we move on here to at 16 least talk to us, and -- I mean, I'd just as 17 soon hear them here, than have everybody come 18 by the office and -- 19 MR. HERNDON: The first speaker then is 20 Mr. Bob Cohen with SAFECO. 21 GOVERNOR BUSH: Good morning. 22 MR. COHEN: Good morning, Governor. 23 Thank you, Governor, and General Milligan, 24 Mr. Treasurer. 25 Thank you, Mr. Herndon, for the opportunity ACCURATE
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2 I'm Bob Cohen representing SAFECO Life 3 Insurance Company. We are one of the providers 4 who made a proposal under the bundled provider 5 program here this -- with the SBA. 6 We filed our letter -- or notice of protest 7 back on October 5th, and we filed it right 8 after we learned that there was a selection 9 proposed of a specified number of providers who 10 would receive on-site visits. 11 And really the on-site visit is the final 12 phase of this review process. If you don't get 13 an on-site visit, you're out. So we felt that 14 was the first time that we needed to protest. 15 And our protest is based on a lot of 16 matters. And I believe you've been briefed on 17 these different matters. 18 But there -- we have a lot of point scoring 19 issues that we've raised, and has to do with 20 products that we've proposed, has to do with 21 the fact that when a product was disallowed 22 under the review process, that it affected not 23 only the scoring on that product, but in many 24 other areas of the review process. 25 We are 9 points below the line that was ACCURATE
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2 9 points out of a possible 1,000 points in this 3 process. We think we have raised issues that 4 would certainly make up far more than 9 points. 5 But part of this, too, is we recognize, 6 having heard the concerns of the State Board of 7 Administration, we heard that full disclosure 8 was important. We fully disclosed everything. 9 Every place where there was a blank to fill in 10 with a fee or a charge, we put it in there. 11 There were other applicants who -- whose 12 proposals have been accepted for on-site, who 13 left some blanks, and the information given by 14 the reviewers was not available. 15 We're not in that category. That -- that 16 should mean something. 17 We also offer a -- not so much a product, 18 but a -- a mechanism for investment called -- 19 we call it the Share Builder Account, but it's 20 a self-directed brokerage window which allows 21 participants in the retirement program, gives 22 them the ability to set aside small amounts 23 every month, and actually buy fractional shares 24 of stocks, unlike in most -- and we're the only 25 one who offers this. ACCURATE
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2 buy either a full share of stock, or you can't 3 buy it, if they want to buy a little bit of IBM 4 or AT&T, or whatever stocks they want to buy in 5 the program, they're able to buy them in 6 fractional shares, and build their account that 7 way. It's -- that's the Share Builder Account. 8 We filed our formal protest yesterday. It 9 has to be filed within 10 days of the notice of 10 protest. Yesterday was our deadline. We 11 couldn't wait until after today's meeting. 12 What we ask, Governor, is that we -- the 13 line be dropped down -- that we at least get 14 the on-site interview. That allows us to be in 15 the further evaluative process. We have 16 products that stack up very well with the 17 others, if not better in some cases. 18 And by being in the next step of the 19 process, we get fully reviewed, as do all the 20 others who have made this next cut. 21 Being so close to the cut, we don't feel 22 that it's going to create an undue burden on 23 the staff or the reviewers to take one more, 24 and move us in. There's no one that is just 25 below us. The point spread starts to spread ACCURATE
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2 We also feel that the line that was drawn 3 was not really based on any -- it certainly 4 wasn't based on anything in the Invitation to 5 Negotiate or the Request for Information. 6 And I don't want to -- I hate to say 7 it's -- it was arbitrary, but it was a line 8 that was drawn without a whole lot of 9 discussion. And certainly in our protest, we 10 argue that it was arbitrary. 11 So -- 12 GOVERNOR BUSH: It has to be. I mean, you 13 do -- it has to be arbitrary. 14 MR. COHEN: Right. 15 I mean, there -- there wasn't anything in 16 the initial submittals that said, those scoring 17 over a certain level will get the on-site 18 interview. 19 It just -- when the -- the line was 20 originally drawn, and then at the meeting of 21 the ITC/PEORPAC (sic), the line was dropped 22 down a couple more to allow Aetna ING and one 23 other into -- or Nationwide in -- into the mix. 24 And we ask that we -- we don't like to 25 protest, especially at this point. I mean, at ACCURATE
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2 legitimate reason to protest, that's fine. 3 But protesting while the review is still 4 taking place is -- is really not a -- a great 5 solution for us, and certainly for the State of 6 Florida. 7 Thank you. 8 TREASURER GALLAGHER: Well, correct me if 9 I'm wrong. My understanding is the reason we 10 have so many in the moderate now is the two 11 that were added at the bottom were two that 12 were at the top in the first go-round. 13 MR. COHEN: That's correct. 14 TREASURER GALLAGHER: And y'all weren't in 15 the top in the first go-round, and you weren't 16 in the top in the second go-round, so that's 17 why you're not on the list. 18 MR. COHEN: That is one reason we're not on 19 the list. 20 The other reason we're not on the list is 21 because of what we believe are significant 22 scoring errors that would have put us above 23 those. 24 Had we been above those, the question is, 25 would the line have still been drawn below ACCURATE
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2 the top of the first go-round, but they weren't 3 at the top of the second go-round. 4 They were at the -- the bottom of those 5 selected for the on-site review. 6 GOVERNOR BUSH: Can you describe the 7 difference of opinion on the -- was this the -- 8 one of your funds get rejected or something? 9 What was the -- 10 MR. COHEN: The way the process was done, 11 Callan & Associates was brought in to review 12 the actual products and to make determinations 13 as to how the products would be classified, and 14 I guess really the -- the worthiness of the -- 15 of the various products. 16 One of our products was classified by 17 Callan, as we proposed it to be, as a 18 money market account. When the second level 19 review came along, which our understanding was 20 that the Mercer review was to accept what 21 Callan had done, and review other items, that 22 money market account got reclassified as a 23 fixed account, which we lost the points for 24 having the product as the money market account. 25 And because it was classified as a fixed ACCURATE
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2 was disallowed. 3 So it cost us points in at least two places 4 there, that one act. That's -- that's the -- 5 really the scoring issue on that. 6 The disclosure issue, I mean, we disclosed 7 everything, we think maybe to our detriment, 8 you know. But we felt that when it says, 9 answer the question, we answer the question. 10 TREASURER GALLAGHER: The -- did you bring 11 the scoring issues up to the advisory panel? 12 MR. COHEN: At the -- at the 13 advisory panel, each person there -- I mean, 14 each provider represented, was allowed to 15 submit one written question that would be 16 addressed at the advisory panel. 17 We had so many issues, we couldn't select 18 the one. So we asked -- I asked Mr. Herndon if 19 it would be possible for us -- for me to talk 20 to somebody from Mercer to raise these issues 21 and get some explanation, which he consented to 22 that, and I talked with the person from Mercer. 23 So questions were answered, although some 24 of the questions could not be answered, because 25 they are matters that we believe were not part ACCURATE
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2 policy issues, such as the diversity of 3 accounts and the -- the full disclosure issue. 4 And also the fact that Callan had looked at 5 it one way, and it got changed another way. 6 There was a question with Mercer as to whether 7 Mercer had made the determination to reclassify 8 it, or somebody from SBA staff had made that 9 determination. 10 So some questions were answered, but 11 largely the questions that we raised in our 12 protest were left unanswered. 13 GOVERNOR BUSH: Any other questions? 14 Thank you for coming. 15 MR. COHEN: Thank you. 16 GOVERNOR BUSH: Tom, can I ask you a 17 question? 18 MR. HERNDON: Yes, sir. 19 GOVERNOR BUSH: On the generic -- whatever 20 we're calling the -- the funds that we've 21 already approved, can a -- can a member of the 22 defined contrib-- defined contribution plan be 23 able to dial up or use a code access on a 24 web enabled system to be able to determine 25 at -- on -- in any given day where their -- ACCURATE
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2 MR. HERNDON: Yes, sir. 3 They'll go through the recordkeeper, the 4 TPA, who will have a daily valuation that'll be 5 marked to market at the -- at the close. 6 Procedures are set up based on when the close 7 is to marked -- 8 GOVERNOR BUSH: What's the -- 9 MR. HERNDON: -- to market. 10 GOVERNOR BUSH: -- what's the difference 11 between that, and a no service proposal? 12 What -- what -- what else does someone get 13 in a no service proposal, where they could do 14 the -- they could get -- they could go to the 15 newspaper I guess and maybe get some of these 16 things. I don't know. 17 MR. HERNDON: They get a different proposed 18 investment line-up than the unbundled product 19 line-up. 20 GOVERNOR BUSH: But other than that, 21 I mean, in terms of the services provided, the 22 access to information, transferability, all of 23 those other things would be exactly the same. 24 MR. HERNDON: Other than that, the 25 no service vendors will provide their ACCURATE
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2 with the TPA and the education program that 3 we're providing. 4 GOVERNOR BUSH: Okay. 5 MR. HERNDON: Before we leave SAFECO, I -- 6 I don't know whether you have an interest in 7 hearing the -- the other side of the coin, so 8 to speak. 9 I mean, we are prepared to sit down with 10 SAFECO, as I think the General was 11 contemplating, and as -- what is normally 12 contemplated in the protest period where 13 there's a -- a seven-day period of discussion 14 and negotiation and so forth. 15 We do believe that there are legitimate 16 responses to each and every one of the concerns 17 that they've raised, some of which we were not 18 aware of till we saw last night in the actual 19 protest -- 20 GOVERNOR BUSH: You're -- 21 MR. HERNDON: -- itself. 22 GOVERNOR BUSH: You're saying you're 23 prepared to sit down with them, but if they're 24 not on the list to -- to make it to the next 25 cut -- ACCURATE
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2 General's comment, it would be to sit down with 3 them and bring back, in effect, a 4 recommendation to you. I'm not sure -- 5 GOVERNOR BUSH: They could get back on? 6 MR. HERNDON: Beg your pardon? 7 GOVERNOR BUSH: They could get back on 8 your -- 9 MR. HERNDON: Well, I guess in -- in theory 10 that's the case. 11 COMPTROLLER MILLIGAN: Well, I mean, if 12 they successfully protest, then I would -- 13 TREASURER GALLAGHER: Well -- 14 COMPTROLLER MILLIGAN: -- assume they're 15 back on. 16 TREASURER GALLAGHER: -- here's the 17 problem. There's -- in seven days, they're 18 going to either successfully or unsuccessfully 19 prove to the SBA staff. 20 MR. HERNDON: Right. 21 TREASURER GALLAGHER: And then after they 22 don't do that, obviously they're going before a 23 hearing officer, and, you know, we'll be around 24 for a couple of months. 25 So I guess the question that Tom probably ACCURATE
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2 MR. HERNDON: We'll contest the protest 3 is -- 4 TREASURER GALLAGHER: Is this -- 5 MR. HERNDON: -- the only thing I know to 6 do. 7 TREASURER GALLAGHER: -- the protest that 8 you have? 9 MR. HERNDON: That's the only one that 10 we've received officially. As I indicated, 11 Horace Mann indicated their intent to protest, 12 but we've received no actual protest from them. 13 TREASURER GALLAGHER: But isn't -- wasn't 14 yesterday the final day to protest? 15 MR. HERNDON: It's 10 days I think from the 16 date of their letter. And I don't recall 17 Horace Mann's -- I have it in some of the 18 materials back here. 19 It may be -- 20 TREASURER GALLAGHER: They all didn't -- 21 MR. HERNDON: -- right now. 22 TREASURER GALLAGHER: -- submit them -- 23 MR. HERNDON: I don't recall that they did. 24 I think they came in at different dates. 25 GOVERNOR BUSH: Tom, do you think -- this ACCURATE
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2 But do you think there's an inverse 3 relationship between the number of bundled 4 providers we pick, and the number of protests 5 that actually will occur? 6 MR. HERNDON: I think there's a direct 7 causal connection, Governor. 8 TREASURER GALLAGHER: Direct -- 9 GOVERNOR BUSH: I mean, what -- this is -- 10 TREASURER GALLAGHER: Exactly. 11 Well -- well, there's probably -- there's 12 got to be some other people that aren't on this 13 list that aren't here; am I wrong? 14 Horace Mann's not on here, First Union's 15 not on there -- 16 MR. HERNDON: There are a number of firm 17 (sic) whom we have not heard anything, and -- 18 and, who I suspect, are -- 19 TREASURER GALLAGHER: -- that's two. 20 GOVERNOR BUSH: Anybody else? 21 MR. HERNDON: Yes, sir. 22 We have as indications of -- of possibly 23 wanting to speak, representatives from VALIC, 24 Nationwide, and SunAmerica. 25 And I don't know whether any of those folks ACCURATE
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2 Side to side movement of their head. 3 And -- 4 TREASURER GALLAGHER: -- back to three, 5 they'd be speaking. 6 MR. HERNDON: -- Mr. -- Mr. Campbell from 7 TIAA-CREF wants to speak. 8 MR. CAMPBELL: Tom, again, your secret 9 notes. I don't want to -- 10 MR. HERNDON: Nothing secret in this state. 11 MR. CAMPBELL: Thank you very much. 12 I'm Malcolm Campbell with TIAA-CREF. 13 GOVERNOR BUSH: Welcome back. 14 MR. CAMPBELL: Thank you very much, 15 Governor, General Milligan, Commissioner. 16 We are here to address the policy issues 17 raised in the SBA agenda at Attachment 5. And 18 I'm speaking specifically of the withdrawal 19 fee; the issue of duplicative recordkeeping of 20 bundled provider, a real -- real bundled 21 provider; and -- and, finally, transparency of 22 fees. And in each of these -- 23 Yes, sir. 24 TREASURER GALLAGHER: Before you get any 25 further, just so I'm caught up here. ACCURATE
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2 dealing with today, you are on -- 3 GOVERNOR BUSH: Item 6. 4 TREASURER GALLAGHER: -- Number 5; is that 5 right? 6 MR. CAMPBELL: If -- if I am -- 7 TREASURER GALLAGHER: Or you're on -- on -- 8 MR. CAMPBELL: Attachment 5. I'm sorry. I 9 meant the attachment -- 10 TREASURER GALLAGHER: Well -- 11 MR. CAMPBELL: -- concerning the 12 recommendations of the PEORP Advisory 13 Committee, and the PEORP -- 14 TREASURER GALLAGHER: Just -- 15 MR. CAMPBELL: -- those advisory 16 committees. 17 TREASURER GALLAGHER: -- just so I 18 understand. 19 GOVERNOR BUSH: That's the next agenda 20 item. 21 MR. HERNDON: No. He's on the right 22 agenda -- 23 MR. CAMPBELL: I'm sorry if I -- if I 24 misspoke -- 25 TREASURER GALLAGHER: Go ahead. I ACCURATE
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2 MR. CAMPBELL: Thank you very much. 3 TREASURER GALLAGHER: I thought -- if he 4 was talking about the Number 5 -- 5 MR. HERNDON: The new -- he's not. He's 6 talking about the bundled provider issue. 7 TREASURER GALLAGHER: Got you. Okay. 8 Good. 9 In that case, I'm tuned in to what he's 10 talking about. 11 I was tuned out, now I'm tuned in. 12 MR. CAMPBELL: In each of those areas, 13 TIAA-CREF is sort of squarely between the 14 cross hairs. So I would ask if I might have a 15 couple more minutes than normally accorded at 16 this occasion to address those issues 17 quickly -- as -- as quickly as possible. 18 GOVERNOR BUSH: How much is a "couple?" 19 MR. CAMPBELL: I may go about 8 minutes, 20 Governor. 21 GOVERNOR BUSH: Okay. 22 MR. CAMPBELL: Thank you. 23 We urge you to make three policy statements 24 for the benefits of public employees who will 25 be offered the opportunity and challenges of ACCURATE
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2 managing their own retirement savings. 3 First, we urge you to make sure that in the 4 end, at least one true nationally experienced 5 significant services bundled provider is 6 included in the Public Employees Optional 7 Retirement Program. 8 Second, we ask that you join with the 9 Legislature in recognizing the value of 10 offering those of your employees who may be 11 risk-averse the option of devoting some of 12 their retirement savings to a best in class 13 guaranteed account. 14 Third, we urge you to assure yourselves as 15 fiduciaries that the so-called rebates to the 16 SBA from providers get translated immediately 17 into benefits for PEORP participants. 18 The issue of true bundled provider, the one 19 that I heard several of you, including 20 Commissioner Gallagher, address earlier. 21 A year ago, in September, with the DOW at 22 10,700, and the NASDAQ at 3500, we met in 23 Panama City to discuss the architecture of a 24 new defined contribution retirement option for 25 the 650,000 employees. ACCURATE
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2 Investment Policy Statement that involved a 3 totally unbundled architecture. At that point, 4 you gave policy guidance, and suggested that 5 the staff adhere to the enabling legislation, 6 and provide for at least one bundled provider 7 who would offer a diversified array of 8 investment products and services. 9 The Legislature heard you, and a number of 10 citizens who have testified on this subject. 11 And this past spring, you passed amendments 12 to the enabling legislation that defined a 13 bundled provider as one that offers both a 14 diversified array of investment options and 15 related services. 16 Yet in the final weeks of the bundled 17 provider competition, there is no certainty 18 that the PEORP will ultimately include one or 19 more true bundled providers. 20 In the end, SBA staff could pick one of the 21 no service candidates, and one of the moderate 22 service candidates, and say that it has 23 satisfied the bundled provider mandate of the 24 statute. 25 That may be technically sat-- that may ACCURATE
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2 square with what Jane Gallucci of 3 Pinellas County, the educator and President of 4 the Florida State Board of Associations, talked 5 to you about last February in Tampa. 6 She urged you to assure that Florida's 7 K through 12 employees had access to several 8 bundled providers. 9 She also said, quote, we are not convinced 10 that the bundled provider selected by the SBA 11 will offer the same kind of services offered to 12 higher education. 13 We are hopeful that you will provide those 14 assurances soon. The PEORP can be a very good 15 program if the peoples' needs are heard and 16 addressed, and choices are given. 17 They, the employees in K through 12, want 18 to talk to people from established financial 19 firms, and they understand if they choose -- 20 that if they choose to do so for higher quality 21 service, you have to pay for it. 22 But what happens if a participant, having 23 selected a moderate service bundled provider, 24 calls up and asks to talk about her account? 25 The moderate service provider phone ACCURATE
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2 Ms. Gallucci, but the SBA rules, I -- under the 3 SBA rules, I have no record of your account. 4 That moderate service provider will be 5 unable to offer her any specific guidance 6 because of the lack of any specific 7 recordkeeping. 8 With TIAA-CREF, or another significant 9 service bundled provider, Ms. Gallucci can go 10 on to the website and access her individual 11 account, she can use the planning tools to 12 model her retirement income illustrations, she 13 can talk on the phone with a trained consultant 14 who has access to her accounts and can clarify 15 and continue to guide her with her retirement 16 planning. 17 We urge you to give the SBA the kind of 18 policy guidance Ms. Gallucci was seeking last 19 February, that at least one of the bundled 20 providers selected for the PEORP will be a true 21 bundled provider, with the kind of allocated 22 individual recordkeeping provided for by the 23 Legislature, that will enable the bundled 24 provider to intelligently answer 25 Mrs. Gallucci's question about her funds with ACCURATE
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2 In your role as a fiduciary, in your role 3 as an elected constitutional officer, we ask 4 you that, doesn't it make sense to hedge your 5 bets by -- by having the SBA's otherwise 6 unproven, unbundled design partnered with 7 experienced nationally recognized full service 8 bundled providers? 9 By offering participants a true bundled 10 provider with low costs, you are providing not 11 only a backstop to the unbundled system, but 12 also competition. 13 As the advisory committee suggested last 14 week, let's compare participant satisfaction 15 with the two systems after a couple of years. 16 Let's look at performance after a couple of 17 years between the unbundled and the truly 18 bundled. 19 Let's not prematurely ditch the idea of 20 recordkeeping because it may be duplicative of 21 what the T-- TPA is doing. 22 Guaranteed account. At Panama City, and in 23 January in Tallahassee, and in February in 24 Tampa, we spoke to you about the value-added by 25 including in the PEORP a guaranteed option, ACCURATE
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2 currently available to thousands of Florida 3 college and university employees. 4 Indeed, this option is used by a 5 substantial majority of the 80,000 Floridians 6 who are TIAA-CREF participants, and over 7 1.5 million of our 2 billion -- 2 million 8 participants nationwide. 9 Backed by over 110 billion dollars in 10 assets, including close to 3 billion in Florida 11 based bonds, mortgages, and real estate, the 12 TIAA Traditional Annuity outperforms other 13 guaranteed accounts proposed for the PEORP, 14 according to Mercer's analysis, and is 15 currently paying 6.5 percent on new deposits. 16 This past spring, the Legislature took note 17 of the importance of a guaranteed account as an 18 option for the PEORP participants. 19 In a letter dated August 30, 2001, 20 House Speaker Tom Feeney reminded the SBA of 21 the changes that the Legislature made to 22 accommodate products like TIAA Traditional 23 Annuity. And I gave you a copy of that letter. 24 Just briefly, he said: This last session, 25 mindful of the recent downturn in the stock ACCURATE
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2 sense to allow State employees the additional 3 option of investing in fixed annuities that 4 would both guarantee -- make guarantees of 5 principal and superior returns. 6 Of course, the tradeoff is that in order to 7 obtain these guarantees and superior returns, 8 the individual choosing this option must be 9 willing to sacrifice some liquidity. 10 While the top performing 11 TIAA Traditional Annuity received 43 points 12 under the Mercer scoring methodology, merely 13 offering this best in class fund as one of its 14 nine diversified investment options resulted in 15 TIAA-CREF's overall score being reduced by 16 100 points, giving TIAA-CREF a negative of 17 57 points. 18 Despite the Legislature's affirmative 19 embrace of a guaranteed account, Mercer's 20 scoring methodology assessed TIAA-CREF, 21 100-point penalty for the -- penalty for the 22 requirement that transfers out of 23 TIAA Traditional be spread out over ten years. 24 There's no support from the PEORP enabling 25 legislation for the 100-point penalty imposed ACCURATE
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2 The issue -- this issue was discussed at 3 some length at the August 14 Trustees meeting. 4 At that point, TIAA-CREF was ranked first among 5 the significant services bundled providers, 6 with 724 points out of 1,000, despite being 7 docked a full 100 points for the ten-year 8 transfer requirement. 9 During that meeting, Mercer's witness and 10 Mr. Herndon, both noted that TIAA-CREF could 11 improve its first place score by reducing the 12 ten-year transfer requirements on its 13 guaranteed account. 14 Since that August meeting, TIAA-CREF has 15 modified its guaranteed annuity to provide for 16 transfers over a seven-year period, a 17 30 percent improvement in the liquidity of this 18 product, without sacrificing the low cost, high 19 value features, highly rated features by all of 20 the rating agencies that have made 21 TIAA Traditional the gold standard. 22 And yesterday we received approval from the 23 New York Insurance Department on that change. 24 And we will shortly file with the 25 Insurance Department in Florida on that change. ACCURATE
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2 PEORPAC and IAC, Mercer grudgingly acknowledged 3 that the penalty might be reduced to 75 points 4 on account of the change in the liquidity 5 provision from ten years to seven years. 6 Even at that, TIAA-CREF's overall score is 7 impacted negatively 32 points, all for having 8 the temerity of offering PEORP participants an 9 extraordinarily highly valued option that no 10 other company provides. 11 The fact is that no points should be 12 deducted as a penalty for this best in class 13 product. 14 The second article we -- the second point 15 we ask is we urge the Trustees to join the 16 Legislature in recognizing the value of 17 allowing PEORP participants access to a best in 18 class guaranteed annuity by eliminating, or 19 significantly reducing the 100-point penalty. 20 The final issue is rebates or transparency 21 of fees, as Commissioner Gallagher was getting 22 at so eloquently at the August 14th meeting. 23 In rescoring all of the bundled providers, 24 TIAA-CREF's scores dropped from 724 to 692, 25 third place in the significant services ACCURATE
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2 707 -- 706 or 707. I may have it wrong here. 3 Aside from the 100-point penalty, this 4 change in scoring was brought about by a Mercer 5 scoring methodology that ignores the cost to 6 PEORP participants, and focuses instead on the 7 size of rebates to the SBA. 8 We applaud the recommendation made last 9 week by the Advisory Committees that any 10 rebates offered by bundled provider candidates 11 to offset administrative expenses, and they are 12 detailed in Appendix VII-A of the Mercer 13 report. I just attached one page of that to 14 your materials to show you that those rebates 15 should benefit participants, not the SBA. 16 This recommendation is consistent with 17 comments made by you, the Trustees, at the 18 August 14 meeting, that you wanted to see the 19 impact on participants of the fees and charges 20 proposed by the bundled provider candidates. 21 Mercer's focus on provider fees net of 22 rebates, not only obscures for participants the 23 true costs of these products, denying them the 24 transparency you urged in August, but it also 25 has the effect of skewing the scoring in favor ACCURATE
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2 retail price, while providing a wholesale 3 discount to SBA. 4 That may be the practice in the commercial 5 401(k) market, it ought not to be part of the 6 publicly supported Optional Retirement Program 7 for public employees. 8 You, as fiduciaries, should make sure that 9 the TPA and its -- and SBA have in place a 10 mechanism that instantaneously rebates the 11 rebate to participants' accounts so that it 12 gets reflected in the real-time net asset 13 values calculated daily that Mr. Herndon spoke 14 about just a few minutes ago. 15 Any mechanism to rebate the rebates short 16 of instantaneously -- and by the way, the 17 industry practice to the extent that rebates 18 get back into the pockets of participants, is 19 to provide additional fund shares quarterly, at 20 best, raises serious fiduciary concerns. 21 And if staff cannot provide you with those 22 assurances, then we urge you to suggest to 23 staff that making final evaluations of the 24 finalists in the next three weeks, the expense 25 components should be based on gross fees ACCURATE
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2 than fees net of rebates to the SBA. 3 Such a policy direction by you, the 4 Trustees, could have the salutary effect of 5 incenting companies in these last three weeks 6 to sharpen their pencils. 7 If they can offer SBA wholesale pricing 8 after charging participants full retail, they 9 can surely cut their fees by the amounts they 10 were proposing to rebate to the SBA. 11 Thank you for bearing with me. 12 GOVERNOR BUSH: Thank you. 13 Any questions, comments? 14 Tom, would you like to -- yeah. If you 15 could respond to the last issue of net versus 16 gross, and immediate rebates to the 17 individuals. That seemed to be a pretty 18 compelling argument to me. 19 MR. HERNDON: Thank you, Governor. 20 In fact, the Advisory Councils addressed 21 this at their meeting last week. 22 And the Board staff has always been 23 contemplating trying to rebate as quickly as is 24 technologically feasible, any rebates that -- 25 or reimbursements that are made available. ACCURATE
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2 we are trying to satisfy as far as making 3 certain that in some cases that can be done 4 from the third party investment firm, to the 5 TPA, and back to the -- to the individual. 6 But technologically, and philosophically, 7 we certainly don't have any quarrel with -- 8 with that, nor with what the Advisory Councils 9 have indicated. 10 TREASURER GALLAGHER: What would keep us 11 from only charging the net to the participants? 12 MR. HERNDON: Not a thing, as long as we 13 can get those reimbursements and rebates back 14 to them. And that's exactly what we 15 contemplate, and our third party 16 administrator's prepared to do that, and have 17 indicated that they do that all the time. 18 So we're not aware of any problems, except, 19 as I indicated, there -- there may be a couple 20 of legal issues that we are trying to just work 21 through. I'm not trying to indicate that 22 they're necessarily an impediment, but they may 23 be. And we just -- 24 TREASURER GALLAGHER: The one that I'm 25 thinking of might be, and I'm just thinking ACCURATE
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2 load of X doll-- you know, 5 percent -- or 3 let's say one -- 5 basis points, and that's 4 what they charge everybody, however, they do 5 rebate different amounts, depending on the size 6 of the account -- 7 MR. HERNDON: Right. 8 TREASURER GALLAGHER: -- to different 9 people, now these bundled providers have -- 10 because it's going to be 8 billion, and they're 11 going to hit the max rebate, therefore, that 12 upon the mutual fund -- the max rebate, 13 let's say, would be 4 basis points, they're not 14 going to let each participant get one, because 15 then they've set a new low. 16 And maybe this -- they have a -- an 17 agreement that says, whatever they charge the 18 lowest, that somebody else gets, and that would 19 throw out their whole thing. 20 That is the only reason I think might be -- 21 make it a little harder to have it -- unless 22 the third party administrator did it to the 23 account -- 24 MR. HERNDON: And that's -- and that's 25 exactly how we contemplate -- ACCURATE
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2 might -- 3 MR. HERNDON: -- is that -- that the -- 4 TREASURER GALLAGHER: -- each recording -- 5 MR. HERNDON: -- whatever the appropriate 6 rebate is from the investment firm that the 7 member has their account with, would be 8 calculated, and credited to their account. And 9 I don't know about instantaneously. That may 10 be a little bit more optimistic than anybody 11 can promise. 12 But certainly in a real-time kind of -- of 13 situation, that's exactly what we contemplate. 14 GOVERNOR BUSH: Could -- there was a 15 comment made in the presentation about how -- I 16 forgot the names of these things -- the 17 moderate service proposal is not truly a 18 bundled provider -- full service bundled 19 provider. 20 But, in essence, wouldn't the third party 21 administrator provide those basic services? 22 Ms. -- what's her name? The lady -- 23 MR. CAMPBELL: Ms. Gallucci. 24 GOVERNOR BUSH: -- from Pinellas. 25 MR. HERNDON: Gallucci. ACCURATE
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2 she -- she could go to the same web enabled 3 system, get the information that you were 4 describing, instead of getting it from -- it'd 5 be gotten from the SBA, or -- 6 MR. HERNDON: Yes, sir. 7 GOVERNOR BUSH: -- or however it would be 8 done, instead of through you, it's the same 9 service, she would have the immediate access, 10 the people that would be answering the calls 11 could -- could access that as well, I assume. 12 MR. HERNDON: That's precisely the point, 13 Governor. 14 GOVERNOR BUSH: Am I -- I mean, do you 15 disagree with that? 16 MR. CAMPBELL: I don't disagree that the 17 TPA will have access to information in order to 18 answer those telephone calls. 19 But if a person has made up his mind, or 20 her mind, that she wants to deal with a bundled 21 provider who is going to offer this full range 22 of services, and the -- the range of services 23 is significantly more than what the TPA can 24 offer, such as in-depth knowledge of the 25 products, that the SBA's TPA would not have ACCURATE
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2 individual through that -- through the hoops of 3 calling just the TPA. 4 GOVERNOR BUSH: Well, that's been the 5 fundamental issue from the very beginning 6 about -- and -- and, you know, we went on a 7 path with a third party administrator for 8 fiduciary purposes, the fact that not everybody 9 would take a full service -- 10 I mean, it's always been in my mind that 11 the basic conflict of why the full service 12 bundled providers were at a disadvantage here, 13 because if we offer these services, your 14 salesperson, whoever's answering the phone, the 15 investment advisor, will be able to access that 16 information, provide the quality investment 17 advice, but y'all have to charge twice for the 18 recordkeeping basically. 19 And I just don't see how that's a -- a 20 great bang for the buck. 21 But, anyway, I -- I want to make sure I 22 didn't miss that there wasn't -- there was a 23 deficiency in the service to the -- to the 24 participant, which is really the most important 25 part in this. ACCURATE
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2 just to -- to try and clarify that question. 3 If -- if Ms. Gallucci were to pick a brand 4 name vendor, and be a part of the PEORP, she 5 can go through the third party administrator, 6 and get the aggregate recordkeeping information 7 performance for all of her accounts, wherever 8 they might be housed in the PEORP program. 9 It's all going to be resident on that TPA's 10 computers. 11 Now, if she wants to go to brand named A, 12 which is one of her investment providers, and 13 get detailed information about the products, 14 she can certainly do that. 15 What brand name A can't do, however, under 16 the conflict of interest issues that you just 17 raised, is talk about brand name B or C or D. 18 That's why we have an education provider 19 who doesn't have investment products. 20 Ernst & Young is impartial. 21 GOVERNOR BUSH: Okay. 22 MR. CAMPBELL: Just -- 23 GOVERNOR BUSH: You want one more shot on 24 it? 25 MR. CAMPBELL: -- just one -- no. Just one ACCURATE
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2 In terms of costs of the record-- allocated 3 record-- recordkeeping that TIAA-CREF does for 4 all of its participants nationwide, they're 5 de minimis. In fact, TIAA-CREF's costs are 6 lower than three out of the four finalists in 7 the -- in the significance -- I mean, the 8 moderate services category. 9 So it -- 10 GOVERNOR BUSH: I just wanted to make sure 11 Ms. Gallucci didn't feel like she was going to 12 get the shaft if she -- 13 TREASURER GALLAGHER: No shaft. 14 GOVERNOR BUSH: -- because she still can 15 access this information. 16 MR. CAMPBELL: She wouldn't have the best 17 available, but you're right. 18 GOVERNOR BUSH: -- that's subject-- that's 19 a subjective point. But at least she has that 20 information. Then -- you know, that's our 21 focus, is on this -- she -- 22 MR. CAMPBELL: Thank you. 23 GOVERNOR BUSH: -- and Tom and other 24 people. 25 Any other comments? ACCURATE
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2 the IAC, the PEORPAC, and the staff to cut the 3 line at the top three, plus ING Aetna and 4 Nationwide, and to direct Prudential to pick 5 one, which they have -- coincidentally, they 6 have told us what their preference is. So -- 7 TREASURER GALLAGHER: That's one -- 8 MR. HERNDON: Yes, sir. 9 GOVERNOR BUSH: Is there a motion? 10 COMPTROLLER MILLIGAN: I will move it. 11 TREASURER GALLAGHER: I'll second. 12 GOVERNOR BUSH: There's a motion and a 13 second. 14 Any other discussion? 15 TREASURER GALLAGHER: Tom, let me just ask. 16 This is with -- given the staff approval if 17 they feel there's a valid change in the -- 18 SAFECO -- is that the one? 19 MR. HERNDON: Yes, sir. 20 GOVERNOR BUSH: And Horace Mann. 21 TREASURER GALLAGHER: -- that they can 22 change that. 23 MR. HERNDON: If Horace Mann protests -- 24 COMPTROLLER MILLIGAN: There may be others. 25 MR. HERNDON: -- theoretically, there may ACCURATE
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2 COMPTROLLER MILLIGAN: And are you 3 suggesting then that they don't come back to us 4 if they find that they -- in their opinion, 5 SAFECO should be eliminated? 6 TREASURER GALLAGHER: That's what I was 7 inferring, that -- I was ask-- I really was 8 asking, was that your motion. I was hoping it 9 was. 10 But if it isn't, you can -- 11 COMPTROLLER MILLIGAN: It clearly wasn't my 12 motion. 13 My motion was to approve the ones they 14 recommended. 15 And it would appear to me that if the 16 protests turn out to be something that they 17 feel appropriate and -- and should bring back 18 to us with a recommendation one way or the 19 other, then they ought to do it. 20 I -- I mean, I'm available, you know, 21 essentially 24 hours a day. 22 TREASURER GALLAGHER: Well, I try to sleep 23 each day. So I -- 24 COMPTROLLER MILLIGAN: Well, you do better 25 than I do. I worry too much about this. I ACCURATE
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2 TREASURER GALLAGHER: I'll bet you have. 3 There's probably less sleep out there than 4 there is up here. 5 All right. So what you're saying is if 6 they come to the conclusion that one of these 7 others should be included, they come back to us 8 to get a -- 9 COMPTROLLER MILLIGAN: I mean, that's the 10 way we do business. 11 MR. HERNDON: That's fine. 12 TREASURER GALLAGHER: Well, that's fine. 13 The only problem I want to point out is 14 that, if, in fact, they're going to go do site 15 visits on these, they don't do a site visit on 16 the one that they're thinking about approving, 17 and come back. 18 But I think that's what these guys are 19 worried about, and I -- I think that's 20 rightfully so. 21 I guess you could still do a site visit on 22 your own, even though -- 23 MR. HERNDON: Yes, sir. 24 TREASURER GALLAGHER: -- you -- get 25 approved. ACCURATE
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2 TREASURER GALLAGHER: So would you mind 3 that, if they give you -- if -- without our 4 approval, they could go do a site visit if they 5 are going to recommend to us to look -- 6 COMPTROLLER MILLIGAN: That I -- I think 7 would make good sense. 8 TREASURER GALLAGHER: Okay. Then with that 9 caveat, I second. 10 GOVERNOR BUSH: Moved and seconded. 11 Any other discussion? 12 The item passes. 13 MR. HERNDON: Item Number 6 is a 14 recommendation to -- 15 GOVERNOR BUSH: Without objection. 16 MR. HERNDON: I'm sorry. 17 Item Number 6 is a recommendation to 18 approve the recommendations of the staff and 19 the IAC and PEORPAC regarding the Tier V 20 annuity product. 21 Let me quickly make this point, if I might. 22 At the -- at the meeting -- the joint 23 meeting that was held last week, the IAC and 24 PEORPAC ultimately did not endorse the staff 25 recommendation to move forward the ACCURATE
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2 fluctuating annuity side for the Tier V 3 annuity. 4 Primarily that was because there were a 5 number of questions about the fluctuating 6 annuity. There was a -- a vote that was taken 7 at the end of the meeting, and it was unclear 8 as to exactly what the -- the final concerns 9 were. 10 We -- we recommended that this item be 11 deferred. And in the interim, we have had the 12 benefit of a conference call with a number of 13 the members of both Councils, most notably with 14 the members who did have some concerns, either 15 that voted no, or were abstaining. 16 They have indicated to us in that 17 conference call, which took place last Friday, 18 that they were now satisfied, that their 19 questions had been answered. And we do have 20 the court transcript of that -- of that 21 conference call available. 22 And so what we are suggesting to you is 23 that the staff recommendation, as originally 24 contemplated, which is to accept Hartford as 25 the Tier V annuity product for both the fixed ACCURATE
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2 TREASURER GALLAGHER: I'll move Item 6. 3 COMPTROLLER MILLIGAN: Second. 4 GOVERNOR BUSH: Moved and seconded. 5 Any discussion? 6 Without objection, it's approved. 7 TREASURER GALLAGHER: They had all the 8 discussion they needed in the advisory panel. 9 MR. HERNDON: Item Number 7 is to adopt a 10 series of proposed rules that have been 11 noticed, and hearings were scheduled, but none 12 were requested, for the workshop or the -- the 13 actual meetings themselves. 14 There was no request for hearings. These 15 are to bring the PEORP program into compliance 16 with some Internal Revenue Service obligations. 17 GOVERNOR BUSH: Is there a motion? 18 COMPTROLLER MILLIGAN: I'll move it. 19 TREASURER GALLAGHER: Second. 20 GOVERNOR BUSH: Moved and seconded. 21 Without objection, it's approved. 22 MR. HERNDON: Item Number 8 is to bring to 23 your attention, and request your concurrence, 24 in a couple of other legislative proposals that 25 have come to light since our last discussion. ACCURATE
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2 some legislation that we're currently drafting, 3 and we've circulated to your staffs, regarding 4 transfer procedures in the event of an 5 unforeseen financial emergency. 6 And obviously we're drawing from our 7 experience of September 11th when the markets 8 actually closed for several days, and 9 experienced a -- a quite tragic disruption in 10 service. 11 What we are essentially saying is that upon 12 a resolution by the Trustees, in the face of 13 that kind of an emergent situation, the posting 14 of assets to individuals' accounts may be 15 suspended for the length of that emergency. 16 And that's the gist of the legislative 17 proposal. Certainly we hope never to have to 18 see that again. 19 The other point that is being proposed here 20 is a penalty for untimely contributions for 21 members' benefits. As you know, you have 22 800 employers out there, not all of them are 23 capable of electronic transmission, although we 24 are working toward that end. 25 And we want to make certain that employers ACCURATE
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2 to speak, and not get money into employees' 3 accounts. 4 So that's the -- the essence of that. And 5 what it contemplates is 3 percent over prime as 6 a penalty, which would inure to the plan or to 7 the members, depending on however the Trustees 8 see fit. 9 TREASURER GALLAGHER: Would this -- is 10 it -- does this have to be done in the statute? 11 MR. HERNDON: Yes, sir. Both of these 12 would need statutory authority. 13 COMPTROLLER MILLIGAN: I'll accept that 14 second one on the basis of for information. 15 But I do have some questions which we'll -- 16 MR. HERNDON: Okay. 17 COMPTROLLER MILLIGAN: -- pursue later on. 18 MR. HERNDON: All right. 19 GOVERNOR BUSH: Do we need a motion on 20 this? 21 MR. HERNDON: Yes, sir. Or at least 22 indicate that these meet with your -- 23 COMPTROLLER MILLIGAN: Certainly I -- 24 MR. HERNDON: -- approval. 25 COMPTROLLER MILLIGAN: -- move that they ACCURATE
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2 GOVERNOR BUSH: Is there a second? 3 TREASURER GALLAGHER: Second. 4 GOVERNOR BUSH: Moved and seconded. 5 Without objection, it's approved. 6 MR. HERNDON: Item Number 9 is the DC 7 implementation Status Report Number 12. This 8 is typically for information. 9 But I did want to just point out very 10 quickly that we are starting the workshops 11 today and tomorrow for the employers. This is 12 essentially the beta test of our employer 13 training program for today and tomorrow. I 14 know some of your staffs are coming. 15 And we also would like the opportunity, and 16 we'll leave this with you, to give you the -- 17 the first 10-minute kind of intro video that 18 has been produced, and I think you'll -- you'll 19 find that to be quite interesting. We'll -- 20 we'll get that to your offices in the next day 21 or two. 22 Item Number 10 is a report by the 23 Executive Director for the fund analysis for 24 the month of July 2001. 25 And finally, Governor and members, we have ACCURATE
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2 on the agenda, and I believe your office has 3 indicated you support for discussion purposes, 4 which is to consider and possibly approve the 5 expansion of the Hurricane Catastrophe Fund 6 coverage in order to provide a buffer against 7 the possibility of higher reinsurance costs. 8 As you know, there are a number of 9 insurance organizations that are reeling from 10 the effects of the September 11th disaster. 11 I think the staff of the SBA, and I suspect the 12 Insurance Commissioner's Office, contemplate 13 that it will have a fairly direct negative 14 effect on the reinsurance market. 15 And this suggestion for possible 16 legislative consideration was discussed with 17 the Insurance Commissioner's Office, and is 18 being proposed today for discussion. 19 TREASURER GALLAGHER: Let me mention why 20 this is an item that might have questions here, 21 Governor. 22 I don't anticipate today that there is any 23 reason whatsoever to change any coverages on 24 the Cat Fund. 25 But what I am concerned about, and letters ACCURATE
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2 everything's going to be just fine, we think. 3 Letters we get from some other insurers say 4 everything is going to be a disaster, they're 5 going to go up 400 percent. 6 We have a letter here from the Florida 7 Insurance Council that basically gives all the 8 reasons why we shouldn't do anything until the 9 special -- till the -- till the upcoming 10 regular session. 11 All I want to do is -- and as you know, we 12 all took our areas of responsibility and looked 13 and said, okay, because of the tragedy, what's 14 going to be affected under my area? 15 The one place that I'm concerned about that 16 could very well be affected, and as early as 17 the December negotiations for the January 18 renewals of reinsurance, would well be a huge 19 increase in reinsurance costs to companies in 20 Florida. 21 My hope is that that doesn't happen. I'd 22 like to just say, I know it's not going to 23 happen, but I don't think anybody can say that. 24 And so all I am asking is that we get 25 permission from the Legislature to let the ACCURATE
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2 circumstances happen and they find it -- they 3 find it -- we find it necessary -- and I -- 4 this would be as of -- we all have to agree, 5 that changes in Cat Fund coverage would be to 6 the advantage of the citizens of Florida, for a 7 short period of time at the rates higher than 8 what is now being paid. 9 And this is really a -- an issue that 10 I believe we should make available to have that 11 flexibility to the Legislature to -- to give us 12 that flexibility, and let them choose whether 13 they should or shouldn't. 14 The reinsurance industry obviously doesn't 15 want us to do that now, because if we did it 16 early, it might influence what happens in the 17 reinsurance market, which, to tell you the 18 truth, that's really what I want to do, rather 19 than us get into the reinsurance market any 20 more than we already are. 21 But if they recognize that we could do it, 22 that might -- kind of what ought to be stable, 23 stays stable. 24 And so that's really why it's here. And I 25 feel that I should move forward with this ACCURATE
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2 so that's why it's on the agenda. 3 GOVERNOR BUSH: Tom, what is the -- the -- 4 the topic of discussion we had about the -- the 5 letter that we sent -- that I sent -- 6 TREASURER GALLAGHER: That's another issue. 7 GOVERNOR BUSH: -- it's separate, but it's 8 a -- 9 TREASURER GALLAGHER: Separate issue. 10 This -- this is strictly the Florida Hurricane 11 Catastrophic Fund that offers at this point to 12 all insurers in Florida a coverage from 13 3.4 billion to 11 billion. 14 My concern is that the first real 15 reinsurance negotiation takes place in January. 16 GOVERNOR BUSH: Right. 17 TREASURER GALLAGHER: None of us know -- I 18 wish we did, including the reinsurers 19 themselves and the brokers, and the reinsurance 20 association, and the Florida Insurance Council, 21 and everybody else in the world has any idea 22 what is actually going to happen by then. 23 The second -- the second thing is that some 24 of those contracts have been allowed to 25 continue until March -- mainly this is ACCURATE
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2 worry about what's going to happen. But the 3 contracts are starting January, then March, and 4 then June. 5 I look at this as an issue of 6 responsiveness. In other words, if, in fact, 7 we need to respond as a state to what could be 8 a reinsurance market major problem, this would 9 allow us to do that. 10 And I don't have any -- 11 GOVERNOR BUSH: How would you -- how would 12 you -- how would it work, how would you -- 13 TREASURER GALLAGHER: The -- there would be 14 a process that would be set up by the 15 Catastrophic Fund that would drive a decision 16 that we would look at in regards to what was 17 happening in the reinsurance market. 18 And we would have to agree, just like we do 19 on the rates, all together that we would 20 respond to that, and how that response would 21 be. 22 GOVERNOR BUSH: Is Jack Nicholson here? 23 TREASURER GALLAGHER: He has an advisory -- 24 unfortunately, at the same time we had our 25 thing, he had an advisory board. ACCURATE
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2 waiting till the Legislature's in session, it 3 would -- it would allow us to respond to a 4 problem -- I would hope that there would be no 5 response needed. 6 I'd be thrilled if everything came in at 7 the same price, or 5 percent higher, I'd be 8 thrilled -- ten even, that would be good. 9 There are those that are predicting a lot 10 higher -- a lot, lot higher. I don't think 11 there's a legitimate reason for the reinsurers 12 that are insuring CAT coverage in Florida to 13 raise rates, other than a small amount, because 14 of a little small additional cost of capital 15 for them. 16 That's my firm belief. However, it is an 17 unregulated market, it is a market that when 18 competition becomes less, has the ability to 19 charge a lot more. We're facing a tighter 20 market going into September 11th. And I don't 21 think there's anybody that says it's a loose -- 22 going to be a looser market. 23 And this is the ability for this state to 24 react, if necessary, in a very timely manner. 25 That's really all I'm asking for. ACCURATE
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2 Tom, for the Legislature to act on this issue 3 when not in session? 4 TREASURER GALLAGHER: No, there's not. If 5 there was, that would be fine. But there is 6 not. 7 COMPTROLLER MILLIGAN: So the -- the only 8 way they can act on -- on the -- are in the 9 session, special or -- 10 TREASURER GALLAGHER: That's correct. 11 That's why I brought it at this time. I 12 wouldn't -- I mean, if they wanted to be a part 13 of this decision making with the leadership or 14 something, I don't have a problem with that. 15 My whole thing is, for us to have the 16 ability to react, if necessary, as I hope 17 there's -- it's not necessary. That's the only 18 reason I'm bringing it up, and -- 19 COMPTROLLER MILLIGAN: And -- and any 20 effort -- any action of this type that might 21 occur during a special session at the end of 22 this month, is there one -- is there really an 23 appropriateness to address that within the 24 mission that they have to -- the missions they 25 have to deal with? ACCURATE
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2 are we really buying? 3 Looks to me like maybe two months, since -- 4 TREASURER GALLAGHER: Right. 5 COMPTROLLER MILLIGAN: -- they'll be back 6 in session in January. 7 TREASURER GALLAGHER: The -- right. 8 January 22nd. 9 The first negotiations basically take place 10 in December for January. That's the concern 11 that I have. 12 COMPTROLLER MILLIGAN: And you -- you 13 mentioned that. 14 TREASURER GALLAGHER: Two -- two things 15 happen if we can't react. If -- if -- and 16 there's a letter that -- that some people think 17 it's going to be 400 percent increase, and 18 some -- things like that. 19 The first thing that happens is that the 20 companies drop their coverage so that they lose 21 their -- their PML in -- 22 COMPTROLLER MILLIGAN: Yeah. I -- I guess 23 I'm -- I'm not really as concerned about 24 discussing the policy -- 25 TREASURER GALLAGHER: Right. ACCURATE
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2 here, which will be -- 3 TREASURER GALLAGHER: That's for another 4 day. 5 COMPTROLLER MILLIGAN: -- smart -- 6 TREASURER GALLAGHER: I agree. 7 COMPTROLLER MILLIGAN: -- another day. 8 It's a question of whether or not we want 9 to push, to some degree, decision making down 10 to improve responsiveness. That's really the 11 question. 12 TREASURER GALLAGHER: That is the issue. 13 GOVERNOR BUSH: Well, there are a couple of 14 other questions that relate to just the 15 practicality of -- of a special session. And 16 this is an issue that I'm dealing -- 17 COMPTROLLER MILLIGAN: Dealing -- dealing 18 with this issue. 19 GOVERNOR BUSH: Well, this issue and -- and 20 the other issues that -- right now the call is 21 very, very tight. It's a negative 22 appropriation call, which means, the only thing 23 they can do is to cut, which is a pretty tight 24 construct for -- for the Legislature. 25 And the intention is to expand the call to ACCURATE
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2 TREASURER GALLAGHER: Safe issues. 3 GOVERNOR BUSH: -- and safety issues. 4 This -- this fits into that general 5 criteria. But the agreement I have with the 6 leadership of both parties, frankly, is that -- 7 that we work to reach consensus prior to 8 expanding the call so that there -- I mean, 9 just imagine what the possibilities of 10 insurance and the subject of insurance to get 11 moved away from -- what I think -- which -- 12 which is a legitimate discussion, how do we 13 prepare ourselves to protect Florida homeowners 14 from escalating insurance. 15 I mean, we have -- we have this issue, not 16 just as it relates to reinsurance, but, as you 17 said, there's a lot more pressures. 18 I -- I think our system is slightly 19 dysfunctional, and we've talked about this, how 20 do we -- how do we -- how do we deal with it. 21 So it's a worthy subject. 22 My fear is that if it's not agreed upon in 23 advance by the leadership of -- of the House 24 and the Senate, then it won't happen, because 25 I'm not going to -- I mean, I'm just very leery ACCURATE
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2 of other issues. 3 Because there's probably a hundred issues 4 related to insurance that one could say, well, 5 this is a security issue, or this is an 6 economic stimulus issue. 7 TREASURER GALLAGHER: I will play -- 8 COMPTROLLER MILLIGAN: This is not really 9 an issue we have to decide as a body, 10 I believe, at this stage. 11 TREASURER GALLAGHER: Yeah. 12 COMPTROLLER MILLIGAN: This is for 13 information. 14 GOVERNOR BUSH: Well, I think the 15 Commissioner wanted some support to -- 16 TREASURER GALLAGHER: Well, I -- I don't -- 17 I don't want to go forward with talking to the 18 leadership of the House or anything. 19 I did present it, because it was the only 20 chance I had last Friday to the joint committee 21 on security, because I thought that was the -- 22 I was asked to come speak on areas of my area 23 that I thought should be looked at. This 24 obviously is one of them. 25 And obviously you -- if the leadership ACCURATE
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2 could re-- respond, then I don't think we ought 3 to take it up, because if they don't, 4 obviously -- I mean -- 5 GOVERNOR BUSH: Well -- 6 TREASURER GALLAGHER: -- we have -- we have 7 insurance companies that, quite frankly, are 8 very nervous about anything to do with CAT fund 9 coming up, because they're -- have a fear that 10 it's -- that it -- you know, this is something 11 to raid the Cat Fund way of doing it, so they 12 don't even want the issue brought up at all -- 13 GOVERNOR BUSH: Raid the CAT fund. 14 TREASURER GALLAGHER: I mean, that 15 they'll -- might get added to whatever they 16 vote -- 17 GOVERNOR BUSH: Oh, sure. You mean on 18 the -- 19 TREASURER GALLAGHER: You know, just -- 20 you know, balance the budget with the Cat Fund 21 is what -- 22 GOVERNOR BUSH: Oh, yeah. 23 TREASURER GALLAGHER: -- believe me, I'm 24 sure there's some staff here that have been 25 looking at things like that. That obviously is ACCURATE
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2 GOVERNOR BUSH: Have y'all got a call on 3 that, out of curiosity -- 4 MR. HERNDON: Yes, sir. 5 TREASURER GALLAGHER: Well, this -- this is 6 something that I think is -- 7 GOVERNOR BUSH: -- be cautious. 8 TREASURER GALLAGHER: -- you know, that 9 would be totally unacceptable. 10 That truly -- I mean, if you have a session 11 that says no taxes, that is -- anything you 12 take out of there forces an incr-- a price 13 increase on every homeowner that -- whose 14 companies have a -- you know, a CAT fund 15 coverage, and that's every company. 16 So that would be a tax increase, I would 17 think. But -- 18 GOVERNOR BUSH: Well, it's kind of hard -- 19 I mean, we're -- I -- I'd be willing to -- to 20 say that we want to pursue this idea, but the 21 idea hasn't been fully vetted. 22 I -- you know, I'd like to know what the 23 strategy would be in terms of stabilizing 24 prices or -- or -- the impacts would be of any 25 proposal -- ACCURATE
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2 again, that's getting into the stuff that 3 General Milligan -- and rightfully so -- says, 4 this isn't the time to try -- to get into all 5 that. 6 The question is, can we react to a problem 7 when it happens in a timely manner. And this 8 is the way I propose to do it. There may be a 9 better way to do. 10 I'm not married to this way. If the two 11 legislative leaders would sit down with the 12 three of us and look at the issue, and make a 13 decision, you know, I don't have a problem in 14 how it's done. 15 I just think that we need what a crisis 16 insurance -- now, hopefully, it will never 17 happen, but if not, then we're sitting there 18 calling a special session, or wait until the -- 19 the January session. 20 Of course, if nothing happens in January, 21 then the -- it's going to be -- indicate it's 22 dragged out to whatever it -- happens. It's 23 not something that we need, in fact -- I hope 24 it's not. 25 But I think it's my responsibility to bring ACCURATE
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2 don't make it. 3 GOVERNOR BUSH: Well, I'd -- I'd be 4 prepared to -- if the suggestion is that -- 5 that we pass it -- or are you asking for some 6 kind of resolution -- 7 TREASURER GALLAGHER: I guess what I'd like 8 to know is that if -- if the three of us agree 9 that we should have a more rapid response than 10 we have right now with it locked in 11 legislation, that we would go speak to the 12 leaders of the House and Senate and say, do you 13 have a way that we could more rapidly respond 14 if we had to. 15 And let them -- 16 GOVERNOR BUSH: I'm fine with that -- 17 TREASURER GALLAGHER: Yeah. 18 GOVERNOR BUSH: I'm fine with that. I 19 just -- 20 TREASURER GALLAGHER: I'm not trying to 21 push something that this is the way it ought to 22 be because I don't -- I'm not married to a way 23 it ought to be. I am -- 24 GOVERNOR BUSH: The challenge -- 25 TREASURER GALLAGHER: -- the concern spoken ACCURATE
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2 GOVERNOR BUSH: The challenge is timing, 3 because we're -- this would have to be this 4 week probably. 5 TREASURER GALLAGHER: Well, I certainly 6 don't mind -- and I don't want to do it without 7 all of us agreeing -- speaking to the 8 leadership of the House and Senate, and just 9 let them see -- 10 GOVERNOR BUSH: I'll do it, too. 11 TREASURER GALLAGHER: -- a proposal, and 12 say, this is what we -- I'll get it -- I'll get 13 one to you -- and I'll have the staff write one 14 up -- have the flexibility in it and say, if 15 y'all agree, this is what we'll take to them. 16 And obviously they can amend it any way 17 they want. All we're looking for is the 18 ability to be flexible, and to answer a problem 19 if it comes. 20 COMPTROLLER MILLIGAN: You're not 21 suggesting what the solution is. We're looking 22 for a solution. 23 GOVERNOR BUSH: So you're -- you wouldn't 24 go to the Legislature with a solution. You 25 would just -- you're seeking delegated ACCURATE
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2 TREASURER GALLAGHER: Well, there -- 3 I mean, you can do it two ways. You can -- the 4 easiest thing is to ask for delegated 5 authority. If there's a -- 6 GOVERNOR BUSH: Get -- the hardest to get, 7 the easiest to ask for. 8 TREASURER GALLAGHER: Well, it's -- it's 9 the easiest thing to write up, you know, is the 10 SBA can do such and such. And you can say with 11 concurrences, whatever you do. 12 Short of that, and wanting a -- a proposed 13 formula, and -- you know, a study to see that 14 because of a man-made or natural disaster, 15 certain things have happened to cause a 16 shortage of reinsurance, that this would kick 17 in, and there would be, you know, a study 18 recommendation brought up, that kind of thing, 19 the staff can certainly write that up and -- 20 you know, sort of some objective criteria 21 there, let y'all take a -- take a look at it. 22 I'm not married to that, or anything else. 23 It's just a way to react, if necessary. 24 COMPTROLLER MILLIGAN: Well, I think there 25 ought to be more than just one option. I think ACCURATE
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2 passed down to the Trustees to make a decision. 3 And you suggested another that the 4 Trustees, in consultation with the leadership 5 of the House and Senate, make a decision. 6 And there's probably many more -- obviously 7 there's another one, don't do anything. 8 TREASURER GALLAGHER: That's certainly one. 9 COMPTROLLER MILLIGAN: It would appear to 10 me that if we're going to go forward with 11 anything, we ought to try to lay out what we 12 think are viable options. And you've suggested 13 at least three that sound viable to me. 14 GOVERNOR BUSH: So to -- just to bring a 15 little closure here, you would work with the 16 staff to come up with a series of 17 recommendations -- 18 TREASURER GALLAGHER: Options I would call 19 them. 20 GOVERNOR BUSH: Options. 21 TREASURER GALLAGHER: -- to -- to have the 22 ability -- the State have the ability to react 23 in a timely manner. That's really all -- 24 all -- 25 GOVERNOR BUSH: And we can -- we can all ACCURATE
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2 TREASURER GALLAGHER: Which one you like 3 best, and -- or take -- recommend them all, and 4 let the Legislature -- 5 GOVERNOR BUSH: Well, clearly the -- the 6 policy -- you know, I guess Senator Latvala and 7 Representative Alexander and the leadership and 8 the appropriators -- 9 TREASURER GALLAGHER: Actually Posey's 10 taken over insurance -- 11 GOVERNOR BUSH: Oh, yeah? 12 TREASURER GALLAGHER: Latvala's just doing 13 the Congressional reapportionment now. 14 GOVERNOR BUSH: Whoever. 15 Anyway, it's important to get us -- to talk 16 to them about it. And -- I just urge this week 17 be the -- be the week. 18 TREASURER GALLAGHER: Well, I'll -- 19 GOVERNOR BUSH: The performance of staff 20 and the Governor's -- 21 TREASURER GALLAGHER: If given direction, I 22 will deliver to them, and we'll get their 23 reaction, and -- 24 GOVERNOR BUSH: Do you need a motion? 25 TREASURER GALLAGHER: Well, I just -- ACCURATE
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2 motion? 3 COMPTROLLER MILLIGAN: Well, I think we've 4 asked Tom to pull together a proposed approach 5 with a number of options. 6 GOVERNOR BUSH: Very good. 7 COMPTROLLER MILLIGAN: We'll look for it. 8 MR. HERNDON: Thank you. 9 GOVERNOR BUSH: Excellent. 10 Thank you. 11 Is that it? 12 MR. HERNDON: Yes, sir. 13 (The State Board of Administration Agenda 14 was concluded.) 15 * * * 16 (The Cabinet meeting was concluded at 17 10:59 a.m.) 18 19 20 21 22 23 24 25 ACCURATE
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2 3 4 5 STATE OF FLORIDA: 6 COUNTY OF LEON: 7 I, LAURIE L. GILBERT, do hereby certify that 8 the foregoing proceedings were taken before me at the 9 time and place therein designated; that my shorthand 10 notes were thereafter translated; and the foregoing 11 pages numbered 1 through 92 are a true and correct 12 record of the aforesaid proceedings. 13 I FURTHER CERTIFY that I am not a relative, 14 employee, attorney or counsel of any of the parties, 15 nor relative or employee of such attorney or counsel, 16 or financially interested in the foregoing action. 17 DATED THIS 28TH day of OCTOBER, 2001. 18 19 ACCURATE STENOTYPE REPORTERS, INC. |
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