The Florida Senate
BILL ANALYSIS AND FISCAL IMPACT STATEMENT
(This document is based on the provisions contained in the legislation as of the latest date listed below.)
Prepared By: The Professional Staff of the Committee on Education
BILL: SB 1656
INTRODUCER: Senator Gruters
SUBJECT: Lawton Chiles Endowment Fund
DATE: March 22, 2021 REVISED:
ANALYST STAFF DIRECTOR REFERENCE ACTION
1. Sagues Bouck ED Favorable
2. AED
3. AP
I. Summary:
SB 1656 modifies how funds are used in the Lawton Chiles Endowment Fund (LCEF).
Specifically, the bill:
Requires annually by October 31, the Chief Financial Officer (CFO) to certify the amount
that reverts to the LCEF principal.
Specifies that the CFO must transfer 50 percent of any reverted funds by December 1 to the
Board of Trustees (BOT) of the University of South Florida (USF).
Requires the BOT to expend any funds received to conduct and support cardiovascular
disease research at the USF Health Heart Institute.
Allows the BOT to use funds for annual operating costs, and for recruiting, retaining, and
equipping researchers.
Prohibits the BOT from pledging any funds to secure debt.
The bill also requires the CFO to notify the BOT annually by December 1 that, if there is no
reverted balance in that year, a balance transfer will not occur.
The bill has no fiscal impact on state revenues or expenditures. However, if unappropriated funds
are transferred to USF rather than back to the LCEF, it may impact the fund’s balance. See
Section V.
The bill takes effect on July 1, 2021.
BILL: SB 1656 Page 2
II. Present Situation:
State Board of Administration
The State Board of Administration (SBA) is created by the Florida Constitution1 and is governed
by a three-member Board of Trustees (Trustees), comprised of senior elected officials; the
Governor as Chair, the Chief Financial Officer, and the Attorney General.2
The Trustees, by law, have ultimate oversight.3 They delegate authority to the Executive
Director, who serves as the chief administrative and investment officer, by administrative rule to
provide the strategic direction and execution of the day-to-day operations.4
The SBA is an apolitical organization with a professional investment management staff and is
required to invest assets and discharge its duties in accordance with Florida law and in
compliance with fiduciary standards of care.5 Under state law, the SBA and its staff are obliged
to:6
Make sound investment management decisions that are solely in the interest of beneficiaries
and investment clients.
Make investment decisions from the perspective of subject-matter experts acting under the
highest standards of professionalism and care, not merely as well-intentioned persons acting
in good faith.
As a fiduciary, the SBA manages assets and provides administrative services that maximize the
return on investments while prudently managing risk, controlling costs and providing appropriate
diversification.7 The SBA is primarily responsible for investing the proceeds of the Florida
Retirement System Pension Plan8, administering the Florida Retirement Investment Plan,9
managing the Florida Hurricane Catastrophe Fund10 and running Florida PRIME11 as well as
investing the proceeds of more than 25 other funds directed to the SBA by the Florida
Legislature.12 The Lawton Chiles Endowment Fund (LCEF) is one of those funds.
1
Art. IV, s. 4, Fla. Const. Section 20.28, F.S.
2
Id.
3
Id.
4
Rule 19-3.016, F.A.C.
5
SBA Florida, Summary Overview of the State Board of Administration of Florida (2021), available at
https://www.sbafla.com/fsb/Portals/FSB/Content/Topics/SBAOverview_20210225.pdf?ver=2021-02-25-085817-737 at 3.
6
Id.
7
Id.
8
SBA Florida, Florida Retirement System Pension Plan,
https://www.sbafla.com/fsb/Portals/FSB/Content/Topics/20170619_FRSPP.PDF?ver=2017-06-19-162056-780 (last visited
March 19, 2021).
9
SBA Florida, Florida Retirement System Investment Plan,
https://www.sbafla.com/fsb/Portals/FSB/Content/Topics/20170619_FRSIP.PDF?ver=2017-06-19-162255-263 (last visited
March 19, 2021).
10
SBA Florida, Florida Hurricane Catastrophe Fund, https://www.sbafla.com/fhcf/ (last visited March 19, 2021).
11
SBA Florida, Florida PRIME,
https://www.sbafla.com/fsb/Portals/FSB/Content/Topics/20181005_FloridaPRIME.PDF?ver=2018-10-05-163903-033 (last
visited March 19, 2021).
12
SBA Florida, About the SBA,
https://www.sbafla.com/fsb/Portals/FSB/Content/Topics/SBAOverview_20210225.pdf?ver=2021-02-25-085817-737 (last
visited March 16, 2021).
BILL: SB 1656 Page 3
Lawton Chiles Endowment Fund (LCEF)
Created by the Florida Legislature in 1999, the purpose of the LCEF is to provide a perpetual
source of enhanced funding for state children’s health programs, child welfare programs,
children’s community-based health and human services initiatives, elder programs, and
biomedical research activities related to tobacco use.13
The SBA has the statutory authority and responsibility for the investment of LCEF assets.14
Florida law specifies that the LCEF must be managed in perpetuity, with an investment objective
of long-term preservation of the real value of the principal.15 The law further requires a specified
regular annual cash outflow for appropriation, as nonrecurring revenue.16
The LCEF receives money from the sale of the state’s right, title, and interest in and to the
tobacco settlement agreement as defined in law.17
Funds from the LCEF which are available for legislative appropriation must be transferred by the
SBA to the Department of Financial Services Tobacco Settlement Clearing Trust Fund.18
Appropriations by the Legislature to the Department of Children and Families, the Department of
Health, or the Department of Elderly Affairs from endowment earnings for health and human
services programs must be deposited into each department’s respective Tobacco Settlement Trust
Fund as appropriated.19
State agencies must use distributions from the endowment to enhance or support increases in
clients served or to meet increases in program costs in health and human services program areas.
Funds distributed from the endowment may not be used to supplant existing revenues.20 All
unencumbered balances of appropriations from each department’s respective Tobacco Settlement
Trust Fund as of June 30 or undisbursed balances as of September 30 must revert to the
endowment’s principal.21
The table below illustrates the funds available, appropriated, and expended in the Tobacco
Settlement Trust Fund for the 2019-2020 fiscal year. During the 2019-2020 fiscal year, $1.9M of
the appropriated funds were not expended.
13
Section 215.5601, F.S.
14
Subject to certain investment limitations and consistent with an Investment Policy Statement approved by the SBA
Trustees. Id.
15
Id.
16
Id.
17
“Tobacco settlement agreement” means the settlement agreement, as amended, entered into by the state and participating
cigarette manufacturers in settlement of State of Florida v. American Tobacco Co., No. 95-1466AH (Fla. 15th Cir. Ct. 1996).
Section 215.56005, F.S.
18
Funds to be credited to the Tobacco Settlement Clearing Trust Fund must consist of payments received by the state from
settlement of State of Florida v. American Tobacco Co., No. 95-1466AH (Fla. 15th Cir. Ct. 1996). Moneys received from the
settlement and deposited into the trust fund are exempt from the service charges. Section 17.41, F.S.
19
Section 215.5601(5), F.S.
20
Id.
21
Id.
BILL: SB 1656 Page 4
Tobacco Settlement Trust Fund Financial Outlook Statement 2019-2020
($ Millions)
22
Funds Available Appropriations23 Expenditures24
Balance Forward $36.3 Agency for Health $269.1 Agency for Health $269.1
from 2018-2019 Care Care Administration
Administration25
Payments Received $335.0 Tobacco Prevention $72.1 Tobacco Prevention $70.2
and Education26 and Education
Transfer from LCEF $7.3
Other funds $1.6
available
Total $380.2 $341.2 $339.3
University of South Florida (USF) Health Heart Institute
The USF Health Heart Institute conducts basic, translational, and clinical research and provides
patient care related to cardiovascular diseases.27 At its core, the Institute’s research activities
address the root causes of cardiovascular diseases, such as coronary artery disease, heart failure,
congenital heart disease, cardiac arrhythmias, peripheral vascular disease, and renal, metabolic
and pulmonary disease as they relate to the heart. The Institute translates knowledge gained
across these domains into novel therapeutics and diagnostics to improve treatment and quality of
life.28
Cardiovascular disease is highly prevalent in the population.29 When defined as coronary artery
disease, heart failure, stroke, and hypertension, the prevalence of cardiovascular disease ranges
from 34 percent to 71 percent of the U.S. population from the ages of 40 to 70 years.30
Cardiovascular disease causes more deaths in the U.S. than any other disorder, including cancer,
diabetes, and Alzheimer’s disease. Despite advances in controlling major risk factors, such as
smoking cessation and high-fat diets, atherosclerotic coronary heart disease, the major cause of
heart attacks remains the most common cause of the cardio-vascular diseases in the United
States.31
22
Office of Economic & Demographic Research, Tobacco Settlement Trust Fund Financial Outlook Statement FY 2019-20
through FY 2025-26 (2020), available at http://edr.state.fl.us/Content/revenues/outlook-statements/tobacco-settlement-
tf/200810_TSTFoutl.pdf.
23
Id.
24
Office of Economic & Demographic Research, Tobacco Settlement Trust Fund Financial Outlook Statement FY 2019-20
through FY 2025-26 including Fiscal Year 2019-20 Closeout (2020), available at
http://edr.state.fl.us/Content/revenues/outlook-statements/tobacco-settlement-tf/201109_TSTFoutl.pdf.
25
Agency for Health Care Administration, https://ahca.myflorida.com/ (last visited march 19, 2021).
26
Florida Department of Health, Tobacco Free Florida, http://www.floridahealth.gov/PROGRAMS-AND-
SERVICES/prevention/tobacco-free-florida/index.html (last visited March 19, 2021).
27
USF Health, USF Heart Institute (2015), available at https://www.usf.edu/pdf/usf-downtown-med.pdf at 3.
28
Id.
29
Id. at 11.
30
Id. at 3.
31
Id.
BILL: SB 1656 Page 5
III. Effect of Proposed Changes:
SB 1656 amends s. 215.5601, F.S., to modify how funds are used in the Lawton Chiles
Endowment Fund (LCEF). The modifications made by the act may provide additional targeted
research funding for cardiovascular disease at the University of South Florida (USF) Health
Heart Institute. Specifically, the bill:
Requires annually by October 31, the Chief Financial Officer (CFO) to certify the amount
that reverts to the LCEF principal.
Specifies that, if a balance reverts in any year, the CFO must transfer 50 percent of the
reverted funds by December 1 to the Board of Trustees (BOT) of USF.
Requires the BOT to first expend any funds received to conduct and support cardiovascular
disease research at the USF Health Heart Institute.
Allows the BOT to use funds for annual operating costs, and for recruiting, retaining, and
equipping researchers engaged in cardiovascular research.
Prohibits the BOT from pledging any funds to secure debt.
The bill also requires the CFO to notify the BOT annually by December 1 that, if there is no
reverted balance in that year, a balance transfer will not occur.
The bill takes effect on July 1, 2021.
IV. Constitutional Issues:
A. Municipality/County Mandates Restrictions:
None.
B. Public Records/Open Meetings Issues:
None.
C. Trust Funds Restrictions:
None.
D. State Tax or Fee Increases:
None.
E. Other Constitutional Issues:
None.
V. Fiscal Impact Statement:
A. Tax/Fee Issues:
None.
BILL: SB 1656 Page 6
B. Private Sector Impact:
Additional funding for cardiovascular disease research may benefit Florida citizens.
C. Government Sector Impact:
The bill has no fiscal impact on state revenues or expenditures. However, if
unappropriated funds are transferred to USF rather than back to the Lawton Chiles
Endowment Fund (LCEF), it may impact the fund’s balance.
VI. Technical Deficiencies:
None.
VII. Related Issues:
None.
VIII. Statutes Affected:
This bill substantially amends section 215.5601 of the Florida Statutes.
IX. Additional Information:
A. Committee Substitute – Statement of Changes:
(Summarizing differences between the Committee Substitute and the prior version of the bill.)
None.
B. Amendments:
None.
This Senate Bill Analysis does not reflect the intent or official position of the bill’s introducer or the Florida Senate.
Statutes affected: S 1656 Filed: 215.5601