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2010 Legislative Preview: Setting the Table

Florida Legislature
Besides facing a $2.6-billion budget shortfall, Florida lawmakers will have a full plate of issues next month. [Photo: AP]

Advocacy: Legislative Preview

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» Offshore Oil Drilling

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» Water Wars

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Florida lawmakers will face a multitude of challenges when they return to Tallahassee in March. The most pressing problems: A projected $2.6-billion budget shortfall, the highest unemployment rate in more than three decades and an unemployment trust fund that’s in the red.

Following four straight years of negative or flat growth in general fund revenue, the Legislature’s Office of Economic and Demographic Research is predicting 6.6% growth in revenue for the 2010-11 budget year. That limited growth in tax receipts, however, will not be enough to cover expected increases in Medicaid and other expenses, leaving budget writers struggling to balance the needs of services such as education, healthcare, public safety and transportation.

As they look for ways to streamline the budget, lawmakers also plan to put state agencies under the microscope.

To aid in that process, Senate President Jeff Atwater has created a Senate Budget Office that will conduct independent analyses of state government agency operations and report its findings to the Policy and Steering Committee on Ways and Means. The group will examine any overlapping agency jurisdictions and functions, the financial structure of agencies, sources and uses of revenue and will look at expenditure patterns and whether performance measures exist and are being met.

In a related move, Florida TaxWatch and other pro-business groups and leaders have been working with lawmakers to come up with a list of $3 billion worth of potential cost savings in the way the state does business. Florida TaxWatch President and CEO Dominic Calabro says his group’s “Government Cost Savings Task Force” is looking for targeted cuts that would not impair critical core services of the government or hurt senior citizens.

Democrats, meanwhile, say they plan to fight any attempts to tap into state trust funds to balance the budget. Rep. Adam Fetterman (D-Port St. Lucie) is leading that charge with House Joint Resolution 389, which proposes an amendment to the constitution that would require a two-thirds vote of each house of the Legislature to expend money from a state trust fund for any purpose other than the one that was intended when the trust fund was created.

Fetterman says his bill will help force future legislatures to keep their word. “My idea is simple in that it says when we make a promise to taxpayers, we keep that promise,” he stated in a release.

Budget fights aside, hot button issues such as oil drilling off the coast and expanded gambling within the state will also be high on the Legislature’s agenda as lawmakers look for ways to increase revenue without raising taxes. Following is a look at how those, and other key issues, might play out in the upcoming legislative session.

Jobs

Endeavour
Endeavour takes off on July 15, 2009. The shuttle program will end this year. Finding replacement jobs is a priority for Space Florida. [Photo: Sandra Joseph - NASA]

Space

Worried that the end of the NASA’s space shuttle program could blast another hole in Florida’s already battered economy, a broad coalition of business groups, lawmakers and other leaders is spearheading an effort to help transition the state’s aerospace industry into a new era of commercial space operations.

Up to 7,000 Kennedy Space Center workers — with an average salary of $77,235 — could receive pink slips when NASA’s shuttle fleet goes out of commission this year. Brevard County leaders warn that another 21,000 indirect jobs could also be lost in the transition, potentially pushing the county’s unemployment
rate up to 13%.

Frank DiBello, president of Space Florida, has laid out a plan called Vision 2020 to triple the size of Florida’s space industry by 2020, and he’s pushing for the passage of space-related bills to help Florida retain a robust space industry as other states compete aggressively for space jobs.

Rep. Ralph Poppell (R-Vero Beach) has reintroduced legislation that would create
tax credits to attract commercial space and high-technology
firms. Other lawmakers are preparing measures that would provide research and development tax credits and aerospace employment tax credits.

Unemployment Compensation

David Daniel
David Daniel, of the Florida Chamber of Commerce, warns against a large readjustment to the unemployment tax rate that employers must pay.

With the state’s unemployment insurance trust fund depleted, Florida employers are facing a record tax increase this year. In August, as the state’s unemployment rate climbed toward a 35-year high of 11%, the trust fund went broke, and the state began borrowing about $300 million a month from the federal government to pay its unemployment compensation benefits.

The depletion of the trust fund triggered an automatic readjustment of unemployment tax rates that will bump the minimum annual rate from $8.40 per employee to $100.30. The maximum annual rate, meanwhile, will rise from $378 per employee to $459.

The large increase could “break the backs of many employers” who are hanging on by a thread, warns David Daniel, vice president of governmental affairs for the Florida Chamber of Commerce. “Frankly, we have to look at a way to soften the blow.”
Options could include lowering the automatic trigger in the law, which occurs if the balance in the fund falls below 4% of the total taxable payroll in the most recent state fiscal year, or allowing employers to pay their taxes quarterly and forgiving the interest they are normally charged for late payments.

In the meantime, the situation has reignited a partisan debate over the Republican-led Legislature’s refusal of $444 million in federal unemployment aid offered last year. Democrats have called Republicans to task for not accepting the stimulus money to help out-of-work Floridians and “modernize” Florida’s unemployment system. Republicans, however, say there were too many strings attached — that the state would have been required to expand the pool of unemployed workers eligible for benefits, thereby putting the state on the hook for even more money down the road.

Concrete Push

As the recession takes a toll on residential and commercial construction, the Florida concrete industry is pushing for a bigger share of the state’s paving projects. “During this particular recessionary period where local jobs are scare, we would like to see the Florida Department of Transportation and cities, municipalities and counties all take a very close look at utilizing concrete for paving roads, intersections, highway, parking lots — any paving that’s out there,” says Tim Kuebler, chairman-elect of the Florida Concrete & Products Association.

Kuebler says the slowdown in construction has produced a 51% drop in concrete consumption since 2005. The industry, which expanded to meet demand during the housing booom, has lost 35,000 jobs; another 91,000 jobs have been lost in related industries such as mining.

Kuebler says the FDOT’s specificiations favor asphalt for road-paving projects because of its lower initial cost, ignoring the frequent need to resurface in a few years. Kuebler says concrete is more economical because it usually can last at least 30 years without resurfacing.

While Kuebler and his colleagues have been sharing their message with lawmakers, he says he hopes that legislation won’t be needed to create a two-pavement system in the state and that the DOT will revise its specifications so that the concrete industry has a fair opportunity to compete.

Concrete industry
The concrete industry wants a bigger share of road building in Florida. [Photo: iStock]

Offshore Oil Drilling

Offshore oil rig
Legislators will debate whether to lift Florida’s ban on offshore drilling. [Photo: iStock]

To Drill or Not to Drill

Florida lawmakers will take another look at the controversial issue of whether to open the state’s coastline to oil and gas exploration.

Proponents of lifting the state’s two-decade ban on drilling in state waters argue that allowing drilling in Florida’s near-shore waters will provide the state with new revenue and help the nation move closer to its goal of energy independence. “The fundamental question is, should Florida, given that we are the third-largest consuming state and the world’s largest consuming nation, play any role in America’s energy supply system? I and many believe that the answer to that is yes,” says Dave Rancourt, a Tallahassee-based lobbyist who represents Florida Energy Associates, the group behind the push for drilling.

Environmentalists and others who oppose the effort contend that drilling is simply too risky and that a major oil spill would significantly harm the state’s ecology and devastate Florida’s tourism industry. Eric Draper, executive director of Audubon of Florida, says he’s confident that the oil drilling effort will be defeated. “It’s a revenue-driven debate, and the revenue’s not there. You can’t fund Florida government on the promise of a Texas wildcatter.”

An offshore drilling bill will almost certainly pass in the House, which last year passed legislation 70-43 that would have allowed the state’s Cabinet to grant drilling permits for oil and gas drilling between three and 10 miles off Florida’s beaches. Rep. Dean Cannon (R-Winter Park), the author of that bill, has vowed to reintroduce legislation this year with a few tweaks. Unlike last year’s bill, the 2010 version will likely require that drilling rigs be at least 5 miles out and not visible to beachgoers. Application fees for obtaining a lease from the state for exploratory drilling would be upped from $1 million to as much as $5 million.

Oil drilling legislation faces a tougher time in the Florida Senate, which refused to take up the issue last year. Senate President Jeff Atwater (R-West Palm Beach) says the Senate will take its time in addressing a “complicated issue with significant ramifications for our state.” Atwater has instructed the Senate Environmental Preservation and Conservation Committee to conduct a detailed and comprehensive review of the implications of offshore drilling. The review will share data with Florida State University’s Institute for Energy Systems, Economics and Sustainability, the Century Commission for a Sustainable Florida and the Office of Economic & Demographic Research.

Even if the Senate doesn’t act this year, the issue isn’t likely to go away. Sen. Mike Haridopolos (R-Merritt Island), the chief proponent of oil drilling in the Senate, says he plans to continue to pursue the issue when he becomes Senate president following the 2010 elections. Cannon will take the reins of the Florida House at the same time.

Taxes

Corporate Tax Enticement

One way to fuel job growth and economic development would be to scrap the state’s corporate income tax, says Dominic Calabro, president and CEO of Florida TaxWatch. A more practical approach, he suggests, would be to change the formula used to calculate the tax.

While Florida currently calculates a company’s tax burden based on the percentage of its in-state sales (50%), property (25%) and payroll (25%), several states including Iowa, Georgia, North Carolina, California and Texas have all moved to a “single sales factor”of taxing businesses. Proponents of the simplified tax formula say a single sales factor makes a state more attractive for businesses to expand their property and payroll.

The Senate Finance and Tax Committee held a workshop on the issue last October, and a TaxWatch work group is assisting lawmakers in drafting legislation to address the issue. The move has garnered bipartisan support. Sen. Jeremy Ring (D-Margate) is pushing the issue in the Senate. Key House supporters include Rep. Ellyn Bogdanoff (R-Fort Lauderdale), chairwoman of the Finance and Tax Council, Rep. Dean Cannon, chairman of the Select Policy Council on Strategic & Economic Planning, and Rep. Will Weatherford (R-Wesley Chapel).

Main Street Fairness Act


The Florida Retail Federation hopes to persuade the Legislature to reinstate tax holidays. [Photo: AP]
Rep. Kurt Kelly (R-Ocala) wants online retailers to pay their fair share of sales taxes and is leading an effort to pass a resolution urging Congress to enact a law to enforce the collection of such taxes. The problem stems from a 1992 Supreme Court case that concluded that retailers are exempt from collecting sales taxes in states where they don’t have an actual brick-and-mortar presence — in effect giving remote internet sellers a 6% price advantage over local retailers. While some online retailers collect the tax voluntarily, many don’t. In 2007, Florida lost some $1.1 billion in uncollected sales tax on e-commerce, according to a University of Tennessee study that estimated the state will lose about $1.4 billion in 2012.

Tax Holidays

The Florida Retail Federation is asking the Legislature to reinstate several sales tax holidays for consumers to purchase items such as school supplies and hurricane preparedness items. Lawmakers decided not to pass bills creating the tax breaks last year because of budget constraints —?a move that federation President Rick
McAllister says hurt retailers, particularly when neighboring states like Alabama and Georgia had their own sales tax holidays.

“We’re working hard to ensure those holidays get preferential treatment and are viewed not as a cost to the budget of Florida but as a stimulus,” says McAllister.

Gambling

Gambling
On the agenda: A comprehensive review of the state’s gaming policy. [Photo: iStock]

Open Gaming?

With Gov. Charlie Crist’s Seminole gambling deal all but dead, House Speaker Larry Cretul (R-Ocala) and Rep. Bill Galvano (R-Bradenton), the Legislature’s chief gaming negotiator, are planning to conduct a comprehensive review of state’s gaming policy to try to decide what the state’s $7-billion gambling industry should look like and how it should be structured to optimize revenue for the state.

The 20-year compact crafted by Crist would have allowed the tribe to operate slot machines and blackjack tables at its seven Florida casinos in exchange for $150 million a year to the state. But lawmakers rejected that deal, arguing that it would adversely impact the state’s already struggling pari-mutuel industry.

While Crist continues to press the Seminole’s case, the pari-mutuel industry is asking lawmakers to level the playing field by reducing their tax rates and allowing them to expand their operations to include slot machines and other Las Vegas-style games. At the same time, some of the nation’s largest casino operators have been trying to persuade Florida lawmakers to auction off full casino licenses regionally around the state so they can operate full blown casinos and
create destination gaming resorts.

Marc Dunbar, a gaming expert who also teaches gambling and pari-mutuel law at Florida State University’s law school, says voters will likely weigh in on the controversial debate. In order to get the conservative caucus of the Republican Party to agree to any potential gaming expansion in the state, “it’s going to have to have a local option, where the county has to affirmatively ratify any type of gaming expansion.”

Education

Education
“The schools are begging for relief,” says Sen. Mike Bennett. [Photo: iStock]

Retooling Class Size

Lawmakers will take another stab at modifying class-size rules that cap classes at 18 students for kindergarten through third grade, 22 in grades four through eight and 25 in high school. While the limits have been phased in slowly and calculated on a school-average basis, the law requires schools to move to actual classroom counts this fall — a move that worries many Florida school boards and superintendents, among others.

Rep. Will Weatherford (R-Wesley Chapel) says he plans to reintroduce legislation passed by the House last year, largely along partisan lines, that would measure class size by school average, rather than on a per-class basis. Sen. Don Gaetz (R-Niceville) plans to introduce a similar measure in the Senate.

Sen. Mike Bennett (R-Bradenton) has introduced legislation (S 738) asking voters to decide if they want to repeal the class-size rules outright. “It’s not working out the way we thought it would,” Bennett recently told the St. Petersburg Times. “The costs are out of control. The schools are begging for relief. We didn’t give them enough flexibility in it.”

Mark Pudlow, a spokesman for the Florida Education Association, says complaints over the costs of implementing the class size amendment that voters added to the constitution in 2002 are disingenuous at best. “We just got out of a special session where the state committed all kinds of money to build trains. I just think it speaks to the commitment, or lack thereof, of some in the Legislature to public education.”

Continued Pudlow: “It is expensive, but we have to have priorities in the state, and public education hasn’t been a huge priority. When you compare our spending to spending by other states, we’re near the bottom, but we’re near the top for law enforcement and corrections. We make our priorities, but I think it’s time public education becomes a priority. We’ll fight this fight.”

Kill the FCAT?

FCAT
State Democrats want to replace the FCAT with a broader set of measurements.

House Democrats want to dump the FCAT and create a new set of comprehensive end-of-course exams in a variety of subjects and expand the way schools are held accountable by focusing on the entirety of a students’ work throughout the year, in addition to the subject-area assessment tests.

“Our bill puts children first by giving parents, school professionals and the education community the power to work out a plan that everyone can buy into,” said Rep. Dwight Bullard (D-Miami), a teacher from Miami and the lead Democrat on pre-K through 12 education policy matters. One bill sponsored by Bullard would phase out the FCAT in the 2014-15 school year.

Environment

Environment
The state pulled Florida Forever funding last year. [Photo: Carlton Ward Jr.]

Florida Forever

A broad coalition of environmental groups is pushing for the state to restore funding to Florida Forever, the state’s land conservation program. Faced with a severe budget shortfall, the Legislature last year pulled funding for the state’s premier land-buying program. Chief Financial Officer Alex Sink and Attorney General Bill McCollum, both of whom are running for governor, have joined with the Florida Forever Coalition in asking lawmakers to back documentary stamp taxes for Florida Forever bonding. With just $15 million in state revenue, the program could raise up to $300 million annually for land acquisition.

Renewable Energy, Round Two

Last year, the Senate passed a sweeping renewable energy package that would have required utilities to produce 20% of their energy through renewable and clean energy sources by 2020. (Fifteen percent of that total would have to come from true renewables like solar and wind technologies, while the remaining 5% could come from nuclear and clean coal technology.) But when Senate leaders refused to take up Rep. Dean Cannon’s (R-Winter Park) oil drilling bill, the House took a pass on the Senate’s renewable energy policy.

Lawmakers are likely to take another stab at energy legislation this year, though Republicans seem averse to any sort of renewable portfolio standard. Instead, look for legislation directing the Public Service Commission to order utilities to undertake more renewable energy projects and to incorporate more renewable energy sources into their portfolios.

Rep. Keith Fitzgerald (D-Sarasota), a member of the Select Policy Council on Strategic & Economic Planning, hopes his colleagues take more interest in the topic this year. “We know that renewable energy is going to be a growth industry nationally and internationally, and Florida is well-situated to be an exporter of these products. I hope it’s not a quiet year. I hope it is a year where it comes back.”

Water Wars

Water Wars
Is it time to establish a statewide water board? [Photo: Will Dickey]

State Water Czar?

The concept of creating a state water distribution system that could effectively pipe water from water-rich regions of north Florida to fast-growing areas farther south caused an uproar when it was first floated in 2003 by the Florida Council of 100. But a recent report from the staff of the Senate Environmental Preservation and Conservation Committee suggests that it may be time to “establish a central regulatory commission that oversees Florida’s water resources and supply development.”

Stormwater Rules Change

Sen. Mike Bennett (R-Bradenton) and Rep. Trudi Williams (R-Fort Myers) are expected to introduce legislation that would require at least an 85% reduction of phosphorus and nitrogen in stormwater discharges. Crafted by the Department of Environmental Protection and the five water management districts, the rule would encourage pollution prevention by providing incentives to developers for using low-impact development strategies.

Housing

Condo Relief

Condos
Bulk condo buyers currently are liable for builder defects. New legislation aims to temporarily change that. [Photo: Daniel Portnoy]

Real estate attorneys say that Florida’s distressed real estate market could get a boost if lawmakers pass the Distressed Condominium Relief Act.

Under current law, anyone who purchases more than seven condo units —?or a lender who takes back a title through foreclosure — is deemed a “developer” and thus becomes liable for any construction defects on the property. “I realized a couple years ago, as the market started to turn down, that the way the law is written, these bulk buyers are going to be exposed to potential liability for all developer obligations —?and that is going to discourage bulk buyers,” says Ruden McClosky attorney Mark Grant.

Grant and Charles Brecker, a lawyer with Stearns Weaver, convinced Rep. Julio Robaina (R-Miami) and Sen. Eleanor Sobel (D-Hollywood) to introduce legislation that would remove developer liability for bulk buyers and bulk assignees who close their transactions within the next two years.

Property Insurance

Insured property
Insurers are being hurt on multiple fronts, says the Florida Insurance Council.
[Photo: AP]

Fear Factors

Despite a quiet hurricane season, many of Florida’s property insurers have found their financial situations deteriorating rapidly, says Sam Miller, executive vice president of the Florida Insurance Council. The companies have been negatively impacted by several factors, Miller says, including increased sinkhole loss claims, increased reinsurance costs, larger-than-anticipated mitigation discounts being given to consumers, increases in fraud related to mitigation discounts and the replacement cost methodology used in the state.

Lawmakers are likely to take a hard look at all those issues as they consider any sort of comprehensive property insurance reform package.

Fraud

Chief Financial Officer Alex Sink has asked Rep. Bryan Nelson (R-Apopka) and Sen. Garrett Richter (R-Naples) to file a bill that would create a major financial crimes bureau in the Division of Insurance Fraud and make other organizational changes to enhance the state’s ability to fight financial crimes. It would also add money laundering as a crime under this unit’s investigatory jurisdiction, creating a “Division of Insurance Fraud and Financial Investigations.”

Newton
Bill Newton, executive director of the Florida Consumer Action Network, says deregulation would mean higher premiums.
[Photo: AP]

Dereg Redux

Following State Farm’s move last year to cease writing policies in the state, lawmakers passed HB 1171, the Consumer Choice Act. Authored by Rep. Bill Proctor (R-St. Augustine) and Sen. Mike Bennett (R-Bradenton), the bill would have allowed insurance companies with a net worth of $150 million or more to market residential insurance policies whose rates would not have been subject to regulatory review.

Gov. Charlie Crist vetoed the legislation, saying it would have effectively allowed insurers to “cherry-pick, or sell only to profitable policyholder risks, while at the same time off-loading their undesirable policyholders that are higher risk to their competitors and Citizens Property Insurance Corp.”

Rep. Bill Proctor plans to try again this year to push through a bill that would allow insurers to market homeowners policies that would not have to be subject to regulatory review.
[Photo: AP]
Proctor

While State Farm recently reached a compromise with state regulators and will remain in Florida, Bennett and Proctor are renewing their push for a Consumer Choice Act this year with at least one significant change. While the 2009 bill would have only applied to about 20 financially strong insurers, the 2010 version would open the bill to all insurance companies offering homeowners’ coverage.

The bill’s backers include Florida TaxWatch, Associated Industries of Florida and the Florida Association of Insurance Agents, among others.

Bill Newton, executive director of the Florida Consumer Action Network, says that deregulating Florida’s property insurance market would send rates “through the roof.”

Public Adjusters

Miller
Sam Miller, executive vice president of the Florida Insurance Council, says the council is pushing to change the five-year statute of limitations for filing claims to two years. [Photo: Ray Stanyard]

The Florida Insurance Council hopes that an OPPAGA report due out this month on public insurance adjusters will lead to more reforms of the growing industry.

Sam Miller, executive vice president of the Florida Insurance Council, says insurers are concerned about the increasing number of reopened claims being filed up to five years after a hurricane —?a trend that has contributed to making Hurricane Wilma in 2005 the third-most-expensive hurricane on record in the state. “It is puzzling to have a homeowner agree to a settlement from an insurance company. They’re happy. Their home is fixed. But three to four years later, possibly because a public adjuster put a flier in their mailbox, they’ve reopened the claim and found a lot of additional damages.”

One fix for the problem that the Florida Insurance Council would like to see is for the state to change the five-year statute of limitations for filing new claims to two years after the date of loss. The Florida Insurance Council has recommended other changes as well, including a ban on in-person and telephone solicitation by public adjusters and a requirement that public adjusters execute proofs of loss.

But the Florida Association of Public Insurance Adjusters says that any such changes will only end up hurting consumers, who rely on public adjusters to help them get the money that is due to them. “The bottom line for any insurance legislation should be whether it protects the rights of consumers to receive full and fair compensation for their losses. You don’t get there by restricting consumer access to the only professionals licensed and trained to serve as their advocates,” says FAPIA President Lenny Bauman.

Government

Pensions

Sen. Mike Fasano (R-New Port Richey) is leading a charge to do away with the Florida Retirement System and move public workers into a defined contribution plan similar to a 401(k). Fasano says the current system of guaranteed benefits exposes taxpayers to too much financial risk. His bill (S 660), which would take effect in July, would make all new employees participate in a defined contribution plan. Rep. John Wood (R-Haines City) and Rep. Steve Precourt (R-Orlando) are sponsoring similar legislation (HB 413) in the House.

SBA Oversight

Chief Financial Officer Alex Sink has been encouraging her fellow Cabinet members to revamp the oversight of the State Board of Administration, the public agency that oversees $133 billion worth of the state’s public investments, including the pension fund for 1.1 million current and retired public employees. Sink would like to add an expert in finance and a participant/beneficiary to the SBA’s board of trustees, increasing it from three members to five. She’s also recommended that the SBA hire an independent, external auditor and that the SBA’s Investment Advisory Council and board receive annual fiduciary training.

But Gov. Charlie Crist and Attorney General Bill McCollum in December punted any decision about changing oversight of the SBA to the Legislature. Rep. Robert Schenck (R-Spring Hill), chairman of the Governmental Affairs Policy Council, says he supports McCollum’s approach. Rather than expanding the SBA’s board, McCollum has proposed expanding the Investment Advisory Council and changing the SBA’s internal audit procedures.

?

Cost Benefit Analysis

Rep. Steve Crisafulli (R-Merritt Island) has reintroduced a bill (HB 93) that would require legislation to be reviewed for its fiscal cost, as well as its benefit, to taxpayers. Currently, lawmakers are privy only to the potential cost associated with legislation. Crisafulli’s bill would require legislative staff to provide a full analysis of bills, including the potential revenue creation, when submitted to the Legislature for consideration. The Florida Chamber of Commerce is championing the move. Sen. Mike Haridopolis (R-Merritt Island) will offer companion legislation in the Senate.

Contingency Fees

Florida Attorney General Bill McCollum is again pushing legislation that would cap the amount of money outside attorneys hired by the state could earn from the state. Legislation, sponsored by Sen. John Thrasher (R-Jacksonville), would specifically prohibit the Attorney General’s Department of Legal Affairs from entering into a contingency fee contract with a private attorney unless the AG makes a written determination prior to entering into the contract that the contingency fee is cost-effective and in the public interest. It would also cap contingency fees at $50 million. Paul Jess, general counsel for the Florida Justice Association, says he can’t understand why McCollum would want to tie the hands of any future attorney general. “We think that is very shortsighted. No one can foresee what the future is going to bring.”