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State of Florida - You can avoid financial collapse, without a credit card?

Date: 2010-01-01 | Author: Michael Letcher

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The State of Florida is facing a financial crisis that is worse than any other that has experienced in its history.

   With a budget deficit of $ 2.3 billion, the State of Florida is one of eight states where a deficit of over $ 1 billion is expected. The budget deficit is being blamed for everything from smaller collections of documentary stamp taxes on a slumping housing market reduced sales taxes on the sale of cars. Dramatic reductions in tourism, consumer spending, and has all corporate income led to lower sales and taxes. And in particular, for the first time in decades there are fewer arrivals into the state.

   Florida property taxes are too high. Voters have not experienced significant reductions in tax Amendment 1, which was approved earlier this year. Although the collapse of the Florida housing market has driven down home values taxable, this was denied by higher tax rates and introduction of new taxes that are not based on the value of the house. The truth is we still face enormous houses Florida Florida Property tax bills - even in a depressed real estate market.

   Florida home insurance is still expensive and difficult to find. The legislation passed in 2007 placed much of the risk of a major hurricane in Florida coasts of Florida taxpayers. The Florida Hurricane Catastrophe Fund to offer low cost insurance companies and reinsurance assumed an additional $ 12 billion at risk. Now, says the Cat Fund has no borrowing capacity to meet its obligations - to estimate a deficit of up to $ 15 billion.

   The State of Florida was so worried about the inability of the Cat Fund to raise money to cover a major hurricane earlier this year which is paid Warren Buffett's Berkshire Hathaway company $ 224 million. However, Buffett's company said that the State would be able to raise $ 4 billion in bond debt if a major hurricane damage produced enough to trigger the Cat Fund.

   The situation in the state run insurance company in Florida - Citizens Property Insurance Corporation is not much better. Citizens Property Insurance has some of the most high-risk homes in Florida, not collect enough in premiums to the risk that it has. Their exposure to the damage on its books is $ 433 billion with a surplus of only $ 4 billion available to pay claims.

   Citizens policyholders face two issues. Firstly there is the risk that citizens can not meet its primary obligations to lower demands storms due to their own difficulty in raising money in the bond market. Secondly, once losses reach a certain level, people expect that the Cat Fund for reimbursement after a series of major storms Florida - a fund that may not have the money needed by the citizens.

   Despite all these developments in Florida are severe, there is really nothing new about a government that does not live within their means and assume the obligations that it has no cash on hand to answer.

   What is new and will send a shockwave throughout Florida is the fact that the state can not borrow in bond markets today, the way has been able to in the past. Indeed, Florida has used your credit card.

   Why is it so difficult for states like Florida to borrow in the current bond markets?

   Issuance of bonds to be easy to state and local governments. It was a simple process and no one thought twice about it. That's changed since the failure of the subprime mortgage market.

   Despite a very low bond default rate is very difficult to attract bond investors these days. Companies that used to hold new bond issues had their ratings downgraded. This is caused securities to be liquid and not less attractive to investors. And do states like Florida have to offer higher interest payments and principal, to sell a bond issue.

   With revenue shortages and a serious bond market frozen all Floridians should be demanding that the state keep tightening their belt. This process has already begun. But you should anticipate the strong opposition of the person cuts in public spending is good thinking big.

   These groups will require that Florida lawmakers increased taxes, instead of making additional cuts in spending. Do not make the mistake of not anticipating where this might lead. Many items currently exempt from Florida sales tax could be made taxable suddenly during the current crisis. Expanding the sales tax could lead to new taxes on everything from Internet sales for various types of consulting services. All that would dramatically increase the cost of our own life and make it much more difficult than that of Florida to emerge from this recession.

   And never underestimate the chance that Florida legislators will address the final death blow to the state - instituting a state income tax.

   It is our job to make sure that never happens!

   If there is a lesson that all governments need to learn during the current financial crisis is this - there is nothing wrong with the "pay as you go" system. Will always stand the test of time no matter how the bond markets are uncertain.

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   Michael Letcher is licensed Certified Public Accountant and a former executive of Bank of America and WR Grace. Florida residents in its use online data to find alternatives for Citizens Property Insurance insurance for your home in Florida. Subscribe to his free monthly newsletter and get the truth about Citizens Property Insurance by visiting => http://www.homeinsurancebuyers.org

Tag : State of Florida, Florida Property Taxes, Florida home insurance, Florida Hurricane Catastrophe Fund, Warren Buffett, Berkshire Hathaway, Citize,

Article Source : http://en.minaartiklar.com/State-of-Florida-You-can-avoid-financial-collapse-without-a-credit-card_158323/

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