Chiles fund may be drained to plug budget hole

Published: Friday, January 9, 2009 at 6:01 a.m.
Last Modified: Thursday, January 8, 2009 at 8:12 p.m.

TALLAHASSEE - Moving to nearly wipe out a tobacco settlement fund designed to help children and the elderly, state lawmakers on Thursday advanced their plan to patch a $2.3 billion hole in the state budget, as Democrats and the state's chief financial officer condemned the decision.

The family of the late Gov. Lawton Chiles, who secured the $13 billion tobacco settlement and was honored by having the fund named after him, strongly objected to proposals that could transfer as much as $1 billion from the $1.2 billion Lawton Chiles Endowment Fund to help balance the state budget.

The funding shifts are in bills that will be voted on by the House and Senate today as part the two-week special session to resolve the budget deficit.

"Please, let's stop this madness," Lawton "Bud" Chiles, the governor's son, told House Democrats during a caucus meeting.

Chiles, who has threatened to sue lawmakers over the move, called the potential transfers "one of the most fiscally reckless things I've heard of."

The fund, created in 1999, was set up to provide a permanent source of funding for children's health and welfare programs, community-based social service initiatives and biomedical research. The fund, which once had more than $2 billion, provides about $50 million a year in investment income for those programs.

A plummeting stock market has undermined the fund's investments, which now total about $1.2 billion.

Chiles said lawmakers now want to remove the "one safety net" for some of the state's most fragile residents, saying selling the investments "at a bargain basement price so that budget holes can be plugged - that is not smart budgeting, that is not smart policy."

"As my father said, you're eating your seed corn," Chiles said, reviving one of the folksy aphorisms of his late father.

Under the proposals, the Senate would take $700 million from the Chiles fund. The House would initially transfer $400 million but could end up taking as much as $1 billion from the fund.

But both proposals would not shift the money until June, with the idea the transfers may not be necessary once the state receives its share of a federal economic stimulus package, which could provide as much as $3 billion in support for health care programs over the next two years.

Noting that he personally knew Chiles as a Polk County native, Senate Ways and Means Chairman JD Alexander, R-Lake Wales, said he had reluctantly agreed to the measure.

"I don't care much for this," Alexander said. "I would like to minimize it. That's why we delayed taking these funds until the end of year to give us every opportunity to offset them with federal dollars."

Rep. Marcelo Llorente, R-Miami, said the House had set up its transfer the same way, hoping that "we don't have to take a $400 million hit."

Chiles was skeptical about lawmakers relying on the federal action to save the fund.

"I think it's fairly ironic for the Republican leaders to say that they're counting on a Democratic administration to pay back a budget hole that they created over the last 10 years through their actions," Chiles said.

Steve Yerrid, a Tampa lawyer who was part of a team of trial lawyers who helped the state secure the tobacco settlement in 1997, said the move would undermine medical research in the state.

"This raid is wrong. It's just plain wrong," Yerrid said. "This is biomedical research for cancer, for the elderly."

Yerrid said he was encouraged by a meeting he had with Gov. Charlie Crist, who assured him that any money taken from the Chiles fund would be replenished when the state receives its federal economic stimulus funds.

Chief Financial Officer Alex Sink called the Legislature's use of the Chiles money "penny-wise and pound foolish."

"By raiding 87 percent of a children's health care fund to patch long-term budgetary shortfalls, the Legislature would be effectively killing the Chiles fund, at time when the faltering economy means Floridians will depend on services like children's health care more than ever," Sink said in a letter to House and Senate leaders.

Sink also blasted the legislative plans to use as much as $600 million from another savings account - the budget stabilization fund - to balance the budget.

The House wants to use up to $600 million from the fund, while the Senate would take $200 million from the fund.

Sink said the House proposal would put the state "at great financial risk," leaving only $72 million in the fund, which she said was "not a sufficient cushion" to make sure the state can pay all its bills.

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