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Sink Enjoying Her Taxing Job

The Tampa Tribune

Published: December 9, 2007

Alex Sink, the state's chief financial officer and the only Democrat sitting on Florida's Cabinet, is clearly enjoying the job she's had for nearly a year.

As one of only two Democrats elected statewide in Florida (the other is U.S. Sen. Bill Nelson), Sink could well be destined for higher office. Her name is often mentioned as a likely challenger to either U.S. Sen. Mel Martinez or Gov. Charlie Crist in 2010.

But for now, the former president of Bank of America in Florida is concentrating on keeping the state financially secure even during an economic downturn. A fiscal conservative, Sink is paying particular attention to Florida's contracting and procurement practices as well as citizens' property insurance woes. Sink doesn't think highly of insurance companies.

Below is an edited transcript of her recent visit with the editorial board.

- Jeff Stidham

Q: How do you like public office?

A: I'm loving it. It's everything I expected and more. I anticipated that we would find a lot of competent and dedicated state employees. We have a couple thousand in the Department of Financial Services. Many of them have served under (former CFO Tom) Gallagher, Bill Nelson, Bob Milligan and all the way back to Bill Gunter, so it's a pretty professional group of people. If I could just run the business of the department and be left alone, I'd be perfectly happy. But, of course, you have to layer the calculus of all the politics on top of it.

Some big picture comments: This office is one that's still not well known around the state - chief financial officer - because it's so new. I came up with a very quick way to describe why it's important and what we do. I say that we're here to protect and safeguard Floridians' assets and money. The three ways we do that are: 1. We manage the business of the state; 2. We do education and advocacy; 3. We have enforcement powers.

During my campaign I talked a lot about fiscal accountability. We did a lot of privatizing and outsourcing in the past eight years, and we're beginning to uncover bad outcomes from many of those decisions. I really wanted to get into the contracting and procurement aspects of managing the business of our state, and, of course, my direct constitutional responsibility is to do all the accounting and auditing and cash management to monitor the money going out the back end. Many times we see money going out that is probably not a good use of our taxpayers' dollars, but we really don't have any way to enforce it because of the way contracts were written on the front end.

Gov. Crist formed the Council for Efficient Government, and so the Department of Management Services does a lot of the front-end contracting. But every agency does front-end contracting, and we're working together in partnership to have these contracting officers focusing on how these outsourcing and privatizing contracts are written and make sure there are a lot of teeth. You all are aware that we had this accounting conversion project under way; $85 million had already been spent five years into it, and it was supposed to be a three-year, $85 million project, and there was no end in sight. I stopped it, and we put it on the shelf. I'm not happy about that $85 million we've spent, but at least we're not spending more down the drain.

Q: Is there any recouping of money from BearingPoint (the computer vendor) on that?

A: I don't think there will be, and the reason is because there were things that - and this goes back prior to my administration - there had been concessions made by both parties, the state and BearingPoint...

It was not a good contract, and this problem that we found was around the issue of governance. In other words, who oversees the performance of the contract? When you do these big projects, it's like building a house. You're going to find a contractor who knows how to build a house, and you should be working very closely together on the specs and what you want. But what you can't let happen is, you take your spouse and your four children along, and each one of the kids wants a different kind of computer system in their room or a different kind of Internet connection or a different telephone, and the contractor is there trying to be agreeable and accommodating every member of your family. Then, at the end of the day, the latest and greatest new thing comes along, and you can't have it because you've got such a convoluted system set up.

That's maybe oversimplifying, but we have 37 state agencies that started telling the contractor, "Well, we want our programs written this way," and then they can't talk to each other. This is where governance comes in.

We've stepped back and said we're not going to do anything until we all figure out how to do governance. I've got a proposal that's under consideration to have the four members of the Cabinet serve as the governance oversight for these big projects.

I know people are on notice now that we have to be more careful about contracting. A

Q: Can you talk about the status of the state's Catastrophic Fund?

A: Because of my background in banking, I'm very concerned about managing the state's risk in a number of areas, the biggest one being the risk from the impact of a major hurricane. Our Cat Fund is the reinsurance fund that the state has put up to offer inexpensive reinsurance to insurance companies to stabilize the rate environment here. We've had a program since Hurricane Andrew to cover a certain storm event, which is now from a $6 billion to a $16 billion storm event. Then we saw after the '04 and '05 storms the global reinsurance market has run away from Florida, and we're nervous about having year after year of four storms a year.

So the availability and capacity of the reinsurance market really shrunk, and that's one of the reasons we saw these double and triple percent rate increases being proposed.

The thought was that if the state would step in with adding more exposure to our Cat Fund, we'd be able to stabilize that situation. So we've gone on the hook now for instead of $16 billion, up to $28 billion. It has stabilized the market. We were told by different analysts that we could expect around 20 percent rate decreases, and you see we're not getting those. I think that if you think of that one in 50 chance that we're going to get a $25 billion storm, what that means is these insurance companies will call on their insurance, which is us, the Cat Fund, and we'll have to come up with $25 billion. Right now we're sitting with between $5 billion and $7 billion in cash there, so we would have to bond. The way the bonds are presented to the market is the bonds are paid off in up to a 30-year period through assessments.

Every one of you is seeing assessments on your home insurance and your car insurance. Businesses are paying on their property and other types of insurance, and it's a big number. If we should happen to have a $28 billion storm, then it's $1.8 billion a year for 30 years. It would be close to 5 percent of whatever your insurance premiums are.

The global market has softened up a lot, so I've got a proposal on the table to ask the Cabinet to assess the market. It's gotten a lot of interest. One of the reasons we're not seeing the decreases we anticipated is because of the cycle when all this business is done. These companies make their decisions about their reinsurance purchases in January and February, and because our Legislature doesn't meet until March or April and bills don't get signed until May, my proposal is that the Legislature set the framework but let the Cabinet, in the fall, make the final decision about what the pricing is going to be, what the market's looking like, whether we need to inject some capital or take some off that table.

Q: Does this mean rates could go down next year?

A: We don't know yet. There are so many moving pieces to the puzzle; I think it's quite possible. The psychology of the market out there is maybe Florida's not going be hit by a hurricane every year.

Q: Are the insurance companies trustworthy?

A: They are greedy, and that's one of the reasons they got in trouble in the first place. State Farm has been sitting here with 35 percent market share. Is it wise in a state like Florida that has a lot of storms to have 35 percent market share? They woke up and decided maybe it wasn't such a good idea. So that's why you've been seeing them dumping policies. All the top four: State Farm, Allstate, USAA and Nationwide. Regardless, I think they probably got overextended in their market share because for so many years they've been rolling in the dough. And they've been rolling in the dough for the last few years because we haven't had any storm events. But from a risk management standpoint, that's a lot of eggs in one basket.

I've met with industry groups and companies, and their communication is so bad that all they talk about is their shareholders, their company, how much money they've lost. I tell them that coming from banking, if that's the way that I spoke about my business, I'd be out of business. They should be talking about their customers and the people who buy insurance, the people who feel this sense of loyalty to their insurance company.

I'd like to see us get out of this Citizens business, but we're not going to get out if it anytime soon because our people have to have someplace to go, and I still believe that we need to encourage other property and casualty companies to come here and just dip their toe in because you can make money here.

Q: Your main objection is the risk factor, not so much the idea of government providing a service that private industry should.

A: Yes. I'd love for us not to be in the business to begin with, but I've seen that you can't force these private enterprises to take risk on the coast if they don't want to do it. Our goal ought to be to downsize Citizens as much as we can, but in the Keys, Citizens is the only game in town, and it has been since after Andrew. We're going to always have to have some government fallback solution.

Q: What do you think of the state of Florida's economy now?

A: Something that everybody's got to pay close attention to; clearly, the real estate market is depressed, but I gave a talk to one of the builder's groups, and I've been in Florida almost 25 years, and I've seen two or three of these already. Part of real estate in Florida is we have these ups and downs. We just haven't had one of these downs since the early '90s. We're in a very overbuilt situation right now. Regardless of what we do on property taxes, reducing property taxes is not going to be the be-all and end-all and cure-all for an oversupply of housing stock we have in our state right now. People are going to have to bear some pain.

The commercial market still looks OK. There will be fallout though; it's just kind of cyclical. I keep an eye on our employment rates, and they've inched up a little bit, but we're still below the national average. We've got a fairly diverse economy, and one of the offsets is bringing tourism back from overseas. No American wants to travel out of the country because of the weakness of the dollar. Tourism is our No. 1 business, and it gives us an opportunity to go back and get some of these tourists back to our state. The economy's not great, and we see that in the way that our revenues have declined, but it could be a lot worse.

Q: Could you give us your view on the property tax situation and what should be done?

A: I like your view - let's let the Budget and Tax Reform Commission do its work. We've already seen that if we try to cobble together knee-jerk solutions, we get very bad unintended consequences. I'd like to see us go back and be sure we've got it right this time.

The Legislature will be coming back in regular session, and they can spend the next six months being very careful and thoughtful about putting something in the Constitution, because it doesn't make us nimble and quick. There are so many issues of fairness and unfairness. There's not one-size-fits-all, and every proposal impacts every county in a different way, and you don't want to punish the counties who have been more conservative than others.

Q: How do you grade our governor?

A: He's got a great heart, and he's really attuned to and listens to constituents.

Q: Do you think he's too quick to say what people want to hear?

A: He likes to say yes a lot. He likes to please people, and sometimes that doesn't work. I think you have to be careful about over-promising. I think we've stabilized the property insurance market. Did people over-promise by saying rates were going to come down 20 percent and they haven't? That's hard to say because it was based on facts and figures. I don't agree with him on everything, but whenever I've wanted to express an opinion or offer a suggestion, his office has been very open.

Q: Are you optimistic about the state?

A: Oh, yeah. It's just like the Wall Street Journal article, "Is Florida Over?" I read that and thought sure we've got some issues here, and it's not as cheap to live here as it used to be, but still I think about the history of our state. We've always been entrepreneurial. We've always been innovative. We're the home of air conditioning and Gatorade. There's enormous research going on in our state, but there are a few clouds out there.

We need to invest more in higher education; who wants to be 49th or 50th in higher ed? People are still going to be coming to Florida because the climate's great, we have no state income taxes for the foreseeable future, and it's still the land of opportunity. And I think of the diversity of our population. I love living in a place where we have a big Puerto Rican population in Orlando, and we have Ybor City and a lot of Hispanic influence. It's exciting. We just need lots of good leaders to step up and keep us on the right path and keep making life better.

ADELAIDE "ALEX" SINK

Professional

Chief Financial Officer for the state of Florida, elected 2006

President, Bank of America Florida

Civic Activities

Commission on Government Accountability to the People

Commission on Education

Florida Chapter of the Nature Conservancy

Beth El Farm Workers Ministry

United Way of Hillsborough County

Graduate of Wake Forest University

Personal