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                             T H E   C A B I N E T 
                          S T A T E   O F   F L O R I D A
                          ETHICS COMMISSION PROBABLE CAUSE
                              STATE BOARD OF EDUCATION
                          DEPARTMENT OF VETERANS' AFFAIRS
                              BOARD OF TRUSTEES OF THE
                           INTERNAL IMPROVEMENT TRUST FUND
                             DEPARTMENT OF AGRICULTURE 
                                AND CONSUMER SERVICES
                           STATE BOARD OF ADMINISTRATION
                        The above agencies came to be heard before 
               THE FLORIDA CABINET, Honorable Governor Bush 
               presiding, in the Cabinet Meeting Room, LL-03, 
               The Capitol, Tallahassee, Florida, on Thursday, 
               March 29, 2001, commencing at approximately 
               10:17 a.m. 
                                    Reported by:
                               LAURIE L. GILBERT COX
                          Registered Professional Reporter
                              Certified Court Reporter
                            Certified Realtime Reporter
                             Registered Merit Reporter
                              Notary Public in and for
                           the State of Florida at Large
                         ACCURATE STENOTYPE REPORTERS, INC.
                                  100 SALEM COURT
                             TALLAHASSEE, FLORIDA 32301

2 APPEARANCES: Representing the Florida Cabinet: JEB BUSH Governor TERRY L. RHODES Commissioner of Agriculture BOB MILLIGAN Comptroller KATHERINE HARRIS Secretary of State BOB BUTTERWORTH Attorney General TOM GALLAGHER Treasurer CHARLIE CRIST Commissioner of Education * * * ACCURATE STENOTYPE REPORTERS, INC.
3 March 29, 2001 I N D E X ITEM ACTION PAGE ETHICS COMMISSION PROBABLE CAUSE: 5 STATE BOARD OF EDUCATION: (Presented by Wayne V. Pierson, Deputy Commissioner) 1 Deferred 6 2 Approved 6 3 Approved 7 4 Approved 7 5 Approved 8 6 Deferred 12 7 Approved 13 8 Approved 13 9 Withdrawn 14 10 Approved 14 11 Withdrawn 14 12 Approved 15 DEPARTMENT OF VETERANS' AFFAIRS: (Presented by Robin Higgins, Executive Director) 1 Approved 16 2 Approved 17 3 Approved 17 4 For Information Only 19 FLORIDA LAND AND WATER ADJUDICATORY COMMISSION: (Presented by Teresa Tinker, Secretary) 1 Approved 24 2 Approved 24 ACCURATE STENOTYPE REPORTERS, INC.
4 March 29, 2001 I N D E X (Continued) ITEM ACTION PAGE BOARD OF TRUSTEES OF THE INTERNAL IMPROVEMENT TRUST FUND: (Presented by David B. Struhs, Secretary) 1 Approved 28 2 Approved 41 Substitute 3 Approved 42 Substitute 4 Approved 44 Substitute 5 Deferred 44 Second Substitute 6 Deferred 44 Third Substitute 7 Withdrawn 45 8 Approved 46 9 Approved 63 10 Approved 64 DEPARTMENT OF AGRICULTURE AND CONSUMER SERVICES: (Presented by Sherman R. Wilhelm, III, Division Director) 1 Approved 67 STATE BOARD OF ADMINISTRATION: (Presented by Tom Herndon, Executive Director) 1 Approved 71 2 Approved 90 3 Deferred 91 4 Approved 114 5 Withdrawn 116 6 Approved 118 7 Approved 118 CERTIFICATE OF REPORTER 122 * * * ACCURATE STENOTYPE REPORTERS, INC.
ETHICS COMMISSION PROBABLE CAUSE 5 March 29, 2001 1 P R O C E E D I N G S 2 (The agenda items commenced at 10:29 a.m.) 3 GOVERNOR BUSH: The first item on the 4 agenda is the Ethics Commission Probable Cause. 5 And I'm supposed -- Colleen's asked me to read 6 this. 7 Probable cause findings in the case of 8 Stephen MacNamara. Without objection from the 9 Cabinet, I'd like to forward the complaint to 10 the Division of Administrative Hearings for 11 further proceedings. 12 ATTORNEY GENERAL BUTTERWORTH: I have a 13 letter that I've -- I've submitted to you, 14 Governor, and the Cabinet members. Like to 15 have it as part of the record. 16 GOVERNOR BUSH: Okay. 17 (The Ethics Commission Probable Cause 18 Agenda was concluded.) 19 * * * 20 21 22 23 24 25 ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF EDUCATION 6 March 29, 2001 1 GOVERNOR BUSH: Board of Education. 2 MR. PIERSON: Item 1 is deferred -- or 3 request deferral. 4 COMPTROLLER MILLIGAN: Move deferral. 5 GOVERNOR BUSH: Motion to defer. 6 Is there a second? 7 COMMISSIONER CRIST: Second. 8 GOVERNOR BUSH: Moved and seconded. 9 Without objection, it's -- it's deferred. 10 MR. PIERSON: Item 2 is a request by 11 Broward Community College for establishment of 12 a special purpose center in Miramar. 13 In the audience is Tony Stallworth (sic), 14 Vice President for Facilities and College 15 Services. 16 COMMISSIONER CRIST: Move. 17 COMPTROLLER MILLIGAN: Second. 18 GOVERNOR BUSH: Moved and seconded. 19 Without objection, it's approved. 20 MR. PIERSON: Item 3 is a request by 21 Seminole Community College for establishment of 22 a special purpose center in Seminole County. 23 And in the audience is Dr. Ann McGee, 24 President. 25 COMMISSIONER CRIST: Move approval. ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF EDUCATION 7 March 29, 2001 1 ATTORNEY GENERAL BUTTERWORTH: Second. 2 GOVERNOR BUSH: Moved and seconded. 3 Without objection, it's approved. 4 Where's President McGee? I can't see here. 5 MS. McGEE: Right here. 6 GOVERNOR BUSH: Hi. 7 MR. PIERSON: Item 4 is a request by 8 St. Petersburg Junior College for establishment 9 of a special purpose center in downtown 10 St. Petersburg. 11 And in the audience is Ms. Susan Reitor, 12 Director of Facilities Planning and 13 Institutional Services. 14 COMMISSIONER CRIST: Motion to approve. 15 ATTORNEY GENERAL BUTTERWORTH: Second. 16 GOVERNOR BUSH: Moved and -- 17 COMPTROLLER MILLIGAN: Second. 18 GOVERNOR BUSH: Moved and seconded. 19 Without objection, it's approved. 20 MR. PIERSON: Item 5 is a request by 21 Central Florida Community College for 22 establishment of a special purpose center in 23 Marion County. 24 And in the audience is Dr. Charles Hayes, 25 Vice President for Administration and Finance. ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF EDUCATION 8 March 29, 2001 1 COMMISSIONER CRIST: Motion to approve. 2 COMMISSIONER RHODES: Second. 3 ATTORNEY GENERAL BUTTERWORTH: Second. 4 GOVERNOR BUSH: Moved and seconded. 5 Without objection, it's approved. 6 MR. PIERSON: We request deferral of 7 Item 6. 8 However, Mr. Pat Tornillo, representing the 9 United Teachers of Dade, has requested to speak 10 to you today about concerns he has regarding 11 the amendment. 12 GOVERNOR BUSH: Mr. Tornillo. Welcome. 13 MR. TORNILLO: Thank you, Governor, 14 Commissioner Crist, members of the Cabinet. 15 I address you this morning, Governor, in 16 the spirit of the great prayer breakfast we 17 attended earlier; and on behalf of my passion, 18 and I certainly hope yours, the children of 19 Florida. 20 So first I would like to commend 21 Commissioner Crist for his scholarship proposal 22 for prospective teachers. It is the right way 23 to reduce the teacher shortage crisis that we 24 face in Florida, and certainly in the nation. 25 And I commend him for it. And we will ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF EDUCATION 9 March 29, 2001 1 support that. 2 Second, I would like to commend our first 3 lady, Laura Bush -- 4 This may be a first, Governor -- 5 GOVERNOR BUSH: I'm -- there's a recorder 6 on somewhere, Pat, so -- 7 MR. TORNILLO: Yeah. 8 GOVERNOR BUSH: -- we're listening. 9 MR. TORNILLO: -- for her call for retired 10 military personnel to start new careers in 11 teaching. 12 There is no doubt that in San Diego when 13 she made that call -- and I also commend her 14 for encouraging the President to increase the 15 amount that is devoted to that from 3 million 16 to 30 million -- that she is right on target in 17 terms of another major initiative to reduce the 18 teacher shortage crisis. 19 Many of those retired military have science 20 and math and engineering degrees. And they 21 also represent a role model with a sense of 22 duty and honor and country that, God's knows, 23 our children need today. 24 But I did want you to know that ten years 25 ago, we had that proposal in Florida. ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF EDUCATION 10 March 29, 2001 1 Senator Jack Gordon passed the alternative -- 2 an alternative education bill for retired 3 military. 4 We did that in collaboration with the 5 University of Miami in Florida -- in -- in 6 Dade County, and it was very successful. Half 7 of the time, they were in the classroom; half 8 of the time they were at the 9 University of Miami. 10 So you might ask, why aren't you now doing 11 that? And the simple reason was, the money was 12 withheld. It does cost more money to do that, 13 and to do it right. And we did it without 14 sacrificing any quality of retired military 15 personnel. 16 Those that we found that could teach, 17 they're still teaching. Those that we found 18 could not, they're doing something else. 19 But that was a very successful program, and 20 it's something that we should do. 21 What we should not do is the deferred rule 22 that you have before you -- or will have before 23 you in which you're being asked to dumb down 24 standard -- teacher standards. 25 When I say dumb down, whether you are being ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF EDUCATION 11 March 29, 2001 1 asked to allow someone to be considered 2 teaching in field with a minor, not a major, in 3 math or science, that's dumbing down. 4 When you are being asked to have 5 67 different school boards set standards for 6 what is effective in the classroom, you could 7 wind up in Florida with 67 different standards. 8 That's not -- that's wrong. That is not right. 9 Also the rule that you're being -- will be 10 asked to affect notification to parents, and 11 guardians of teachers being out of field. It 12 eff-- will affect teacher financial aid, and 13 critical shortage area designations. 14 Now, I have a solution: Reject the rule, 15 send it back -- I've already talked to 16 Commissioner Crist. Representative Ralph Arza 17 is carrying a teacher quality bill. 18 Let's work with the Commissioner to remove 19 any negative lowering of standards, and put 20 some real alternatives in there that will 21 maintain the high standards for teaching that I 22 know you want, and we want. 23 This is not the way to do it. We'll be 24 happy -- we -- I'm glad you're deferring the 25 bill, because it -- the rule. It gives us a ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF EDUCATION 12 March 29, 2001 1 chance then to work to do something to fix this 2 particularly really bad bill. 3 And I just wanted the opportunity to let 4 you know that it's the -- the right way to do 5 it is to recruit military, and others. We have 6 no problem. 7 If there are others who have retired, and 8 they want to become teachers, then we ought to 9 encourage them. But we ought to do it without 10 lowering the standards for children in the 11 classroom. 12 Thank you very much, Governor. 13 GOVERNOR BUSH: Thank you. 14 MR. TORNILLO: Commissioner. 15 GOVERNOR BUSH: Thank you, sir. 16 There's a motion to defer? 17 Have we -- have we had a motion yet? 18 COMMISSIONER CRIST: Motion. 19 ATTORNEY GENERAL BUTTERWORTH: Second. 20 COMMISSIONER RHODES: Second. 21 GOVERNOR BUSH: Motion to defer and second. 22 And it passes without objection. 23 The deferral will be until April 10th. 24 Commissioner, is that -- 25 COMMISSIONER CRIST: Yes, sir. ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF EDUCATION 13 March 29, 2001 1 GOVERNOR BUSH: Okay. 2 MR. PIERSON: Item 7 is amendment to 3 Rule 6A-1.09412, course requirements for a 6 to 4 12 basic, and adult secondary programs. 5 COMMISSIONER CRIST: Motion to approve. 6 COMMISSIONER RHODES: Second. 7 GOVERNOR BUSH: Moved and seconded. 8 Without objection, it's approved. 9 MR. PIERSON: Item 8 is an amendment to 10 Rule 6A-1.09441, requirements for programs and 11 courses funded through the FEFP, Florida 12 Education Finance Program, and for which the 13 student may earn credit through high school 14 graduation. 15 COMMISSIONER CRIST: Motion to approve. 16 GOVERNOR BUSH: Is there a second? 17 COMMISSIONER RHODES: Second. 18 GOVERNOR BUSH: Moved and seconded. 19 Without objection, it's approved. 20 MR. PIERSON: We request withdrawal of 21 Item 9. 22 COMMISSIONER CRIST: Motion to withdraw. 23 COMMISSIONER RHODES: Second. 24 GOVERNOR BUSH: There's a motion to 25 withdraw and a second. ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF EDUCATION 14 March 29, 2001 1 Without objection, it's withdrawn. 2 I don't even know if you have to do that. 3 Do you? 4 I guess you do. 5 COMMISSIONER CRIST: It's on my sheet. 6 MR. PIERSON: Item 10 is an amendment to 7 Rule 6A-20.0131, critical teacher shortages. 8 COMMISSIONER CRIST: Motion to approve. 9 COMMISSIONER RHODES: Second. 10 GOVERNOR BUSH: Moved and seconded. 11 Without objection, it's approved. 12 MR. PIERSON: Request withdrawal of 13 Item 11. 14 GOVERNOR BUSH: Motion -- 15 COMMISSIONER CRIST: Motion to withdraw. 16 GOVERNOR BUSH: Motion to withdraw. 17 Is there a second? 18 SECRETARY HARRIS: Second. 19 GOVERNOR BUSH: Without objection, it's 20 approved. 21 MR. PIERSON: Item 12 is an amendment to 22 Rule 6A-14.030, Instruction Awards in Community 23 Colleges. 24 COMMISSIONER CRIST: Motion to approve. 25 SECRETARY HARRIS: Second. ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF EDUCATION 15 March 29, 2001 1 GOVERNOR BUSH: Moved and seconded. 2 Without objection, it's approved. 3 A little more enthusiasm, Cabinet. 4 ATTORNEY GENERAL BUTTERWORTH: Kristin is 5 reporting on this. 6 GOVERNOR BUSH: I know. 7 Right now -- about one quarter of the way 8 the Cabinet meeting, this is going to be a 9 pretty boring report, don't you think? 10 Well, we'll -- I'll figure out a way to 11 liven it up. 12 COMPTROLLER MILLIGAN: There will be 13 opportunities. 14 GOVERNOR BUSH: There will be? 15 COMPTROLLER MILLIGAN: Oh, yeah. 16 GOVERNOR BUSH: Good. 17 (The State Board of Education Agenda was 18 concluded.) 19 * * * 20 21 22 23 24 25 ACCURATE STENOTYPE REPORTERS, INC.
DEPARTMENT OF VETERANS' AFFAIRS 16 March 29, 2001 1 MS. HIGGINS: I hope this is not the 2 opportunity. 3 GOVERNOR BUSH: Department of 4 Veterans' Affairs. 5 Colonel Higgins, how are you? 6 MS. HIGGINS: I'm doing well this morning, 7 Governor. 8 How are you? 9 GOVERNOR BUSH: Great. 10 MS. HIGGINS: I -- the first is I'd like to 11 recommend acceptance of the minutes of the 12 November 29th, 2000, Cabinet meeting. 13 GOVERNOR BUSH: Is there a motion? 14 COMPTROLLER MILLIGAN: Motion. 15 COMMISSIONER RHODES: Second. 16 GOVERNOR BUSH: Moved and seconded. 17 Without objection, it's approved. 18 GOVERNOR BUSH: Thank you. 19 ATTORNEY GENERAL BUTTERWORTH: Enthusiasm. 20 MS. HIGGINS: Thank you. 21 The next item is I'd like to request -- 22 recommend acceptance of our quarter-- second 23 quarterly report for 2000-2001 fiscal year. 24 GOVERNOR BUSH: Is there a motion? 25 ATTORNEY GENERAL BUTTERWORTH: There is a ACCURATE STENOTYPE REPORTERS, INC.
DEPARTMENT OF VETERANS' AFFAIRS 17 March 29, 2001 1 motion, Governor. 2 COMMISSIONER CRIST: Second. 3 COMMISSIONER RHODES: Second. 4 GOVERNOR BUSH: Moved and seconded. 5 Without objection, it's approved. 6 MS. HIGGINS: The third item is I'd like to 7 give you just a short update of our outsourcing 8 project in our nursing homes -- in our nursing 9 home in Broward County. I've been trying to 10 keep most of you informed. 11 And I'm pleased to say that as of this 12 morning, we will have signed contracts for the 13 three major areas that we've been looking at. 14 And we believe that these contracts -- the bids 15 that we got back, and the contracts that we're 16 signing will, indeed, afford us the same, or, 17 in fact, I think better quality than we now 18 have, and will allow us to save the State 19 money -- about 11 percent over -- over a 20 three-year period. 21 So we're very pleased with that. I've been 22 keeping the veterans organizations informed and 23 up-to-date. And I think -- I think we're going 24 to have a very good successful program. 25 GOVERNOR BUSH: Can I ask you a question, ACCURATE STENOTYPE REPORTERS, INC.
DEPARTMENT OF VETERANS' AFFAIRS 18 March 29, 2001 1 Robin? 2 MS. HIGGINS: Yes, sir. 3 GOVERNOR BUSH: The -- the one concern that 4 the veterans -- 5 First of all, I want to commend you on this 6 effort, because it's a model of how to 7 competitively bid out services and keep people 8 who might be concerned about it in the loop, 9 and constantly communicate. 10 And you see from the savings that they're 11 pretty significant. Those are annual savings 12 that generate a half a million dollars that can 13 be reinvested in other things. 14 One of the concerns that -- that I've had, 15 and I -- and I know the veterans groups were 16 concerned when we met with them, related to 17 health services. 18 How do we maintain the quality assurance 19 for nursing home patients and their families 20 for the -- the -- what are called CNAs? 21 MS. HIGGINS: Yeah. 22 That was -- that was the one issue that 23 those people who were concerned about our 24 program, were most concerned about, is how we 25 maintain or improve, in fact, the quality of ACCURATE STENOTYPE REPORTERS, INC.
DEPARTMENT OF VETERANS' AFFAIRS 19 March 29, 2001 1 care when we are outsourcing some -- many of 2 our certified nursing assistants, the CNAs in 3 the home. And that was really the bone of 4 contention. 5 Thanks to input from certain legislators, 6 and some of -- some of you, and from -- from 7 veterans groups, we were able to write into the 8 Invitations to Bid, and then into the contract, 9 some real quality standards that I think will 10 improve quality. 11 And some of those, for example, are that we 12 are requesting that every CNA be -- that is 13 assigned to the home, have one-year experience 14 in the field. 15 That's something that right now, we don't 16 require of State employees in our other homes. 17 And I think that will help a great deal. 18 The other is that we're requiring that they 19 are able to perform their duties in English. 20 And I understand that that's been a problem in 21 the past, that -- make sure that we can 22 maintain the communication between the 23 patient -- the resident, and the -- and the 24 certified nursing assistant. 25 The other is that we are providing for -- ACCURATE STENOTYPE REPORTERS, INC.
DEPARTMENT OF VETERANS' AFFAIRS 20 March 29, 2001 1 financial incentives for low turnover rates, 2 and financial disincentives for high turnover 3 rates. 4 And the -- the last is that we requested in 5 our Invitations to Bid, references from the -- 6 and recommendations for each of the bidders. 7 And, in fact, the one that we selected had 8 just really outstanding references. And, 9 in fact, provide -- are currently providing, 10 and have for about a dozen years, I think, 11 quality healthcare to many people, clinics 12 and -- and hospitals up and down the east coast 13 to include active duty military facilities. 14 So they are used to the people that they 15 will be caring for. And we're very excited 16 about the opportunity to -- to go -- go forward 17 with. And so are the -- so is the company as 18 well. 19 GOVERNOR BUSH: Thank you. 20 MS. HIGGINS: And if there are no other 21 questions then, the fourth item is -- is merely 22 an informational item. 23 We put together a two-year accomplish-- 24 Commissioner, did you have a question? 25 COMMISSIONER CRIST: I did. ACCURATE STENOTYPE REPORTERS, INC.
DEPARTMENT OF VETERANS' AFFAIRS 21 March 29, 2001 1 Governor, may I -- 2 GOVERNOR BUSH: Yeah. Please. 3 COMMISSIONER CRIST: -- one. 4 I was cur-- I noticed that at Lake City, 5 you've -- 6 I want to commend you, too. Great savings. 7 Thanks. 8 MS. HIGGINS: Thank you. 9 COMMISSIONER CRIST: At Lake City, you've 10 used some prison labor, and wanted to see if 11 maybe you're exploring that at some other 12 facilities as well. 13 MS. HIGGINS: We have, in fact. And we 14 were very fortunate at Lake City, and it's 15 working very well. 16 We have explored it a little bit, and we're 17 going to continue to explore it in this home; 18 and, of course, in the two future nursing homes 19 as well. 20 We were a little concerned about this 21 particular facility for a couple of reasons. 22 We did explore the use of a juvenile justice 23 facility that is on the same grounds. 24 But because we found that this facility 25 serves -- serves sexual offenders, youthful ACCURATE STENOTYPE REPORTERS, INC.
DEPARTMENT OF VETERANS' AFFAIRS 22 March 29, 2001 1 sexual offenders, we thought that at least for 2 right now, until we know what kind of neighbors 3 they are, that this would probably be 4 inappropriate -- 5 GOVERNOR BUSH: Good thinking. 6 MS. HIGGINS: -- for a beginning program. 7 And -- 8 COMMISSIONER CRIST: Very. 9 MS. HIGGINS: -- in the future though -- 10 and the other thing is, because there was some 11 concern about a new program, we wanted to make 12 sure that we had no problems, that we had good 13 solid contracts. 14 We have, in fact, on that -- on that lawn 15 service contract, are saving 26 percent. So 16 there's already a significant serv-- savings. 17 But we will, in fact, be looking into that, 18 because we think that that can be useful, not 19 only for cost savings, but helping to employ 20 prison labor that I think, you know, will 21 help -- help them as well. 22 So we'll -- we will be exploring that. 23 COMMISSIONER CRIST: Thank you. 24 MS. HIGGINS: And the -- the last issue, as 25 I said, is we just prepared a two-year ACCURATE STENOTYPE REPORTERS, INC.
DEPARTMENT OF VETERANS' AFFAIRS 23 March 29, 2001 1 accomplishments list. 2 As you can see from that, we have a lot 3 more to do. But I thought, you know, halfway 4 into our term here, it was probably a good idea 5 to look back and see what kinds of things we 6 were able to accomplish, thanks to your help, 7 the legislators' help, and, of course, the help 8 of many veterans around the state. 9 I'm real pleased with -- with the 10 accomplishments lists. As I said, we have a 11 lot more to do. But this gives us a guideline 12 of those kinds of things that can be 13 accomplished if we all work together. 14 GOVERNOR BUSH: Thank you. 15 MS. HIGGINS: Thank you. 16 (The Department of Veterans' Affairs Agenda 17 was concluded.) 18 * * * 19 20 21 22 23 24 25 ACCURATE STENOTYPE REPORTERS, INC.
FL LAND/WATER ADJUDICATORY COMMISSION 24 March 29, 2001 1 GOVERNOR BUSH: The Florida Land and Water 2 Adjudicatory Commission. 3 That's a first. I got that right. 4 MS. TINKER: Good morning. 5 Item Number 1, recommend approval of the 6 minutes of the November 29th, 2000, meeting. 7 COMPTROLLER MILLIGAN: Move the minutes. 8 COMMISSIONER RHODES: Second. 9 GOVERNOR BUSH: Moved and seconded. 10 Without objection, it's approved. 11 MS. TINKER: Item Number 2, recommend 12 approval of the proposed final rule amending 13 the boundaries of the Tampa Palms Community 14 Development District. 15 COMPTROLLER MILLIGAN: Motion. 16 COMMISSIONER RHODES: Second. 17 COMMISSIONER CRIST: Second. 18 GOVERNOR BUSH: Moved and seconded. 19 Without objection, it's approved. 20 MS. TINKER: Thank you. 21 GOVERNOR BUSH: Theresa, why don't you 22 describe what this is for -- for our friend 23 from Lincoln High School? 24 MS. TINKER: The Tampa Palms Community -- 25 GOVERNOR BUSH: No. The -- ACCURATE STENOTYPE REPORTERS, INC.
FL LAND/WATER ADJUDICATORY COMMISSION 25 March 29, 2001 1 MS. TINKER: -- Development. 2 GOVERNOR BUSH: -- Florida Land and Water 3 Adjudicatory Commission. 4 MS. TINKER: Oh, the Florida Land and Water 5 Adjudicatory Commission? 6 GOVERNOR BUSH: I've had my -- 7 MS. TINKER: The Commission -- 8 GOVERNOR BUSH: -- doubts. I was just -- 9 if I asked it for you maybe -- then I would 10 know. 11 MS. TINKER: The Commission -- 12 The Commission serves -- serves as an 13 oversight body for land and water issues that 14 basically deal with development in communities. 15 You have oversight for areas of Critical 16 State Concern, development of community 17 development districts that exceed 1,000 acres 18 in size, comprehensive plan changes, 19 developments of regional impact. 20 You basically sit as a super 21 County Commission -- 22 GOVERNOR BUSH: Thank you. 23 MS. TINKER: -- on these issues. 24 GOVERNOR BUSH: Any other questions? 25 MS. TINKER: Thank you. ACCURATE STENOTYPE REPORTERS, INC.

FL LAND/WATER ADJUDICATORY COMMISSION 26 March 29, 2001 1 GOVERNOR BUSH: See ya. 2 (The Florida Land and Water Adjudicatory 3 Commission Agenda was concluded.) 4 * * * 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 27 March 29, 2001 1 GOVERNOR BUSH: Board of Trustees. 2 MR. STRUHS: Good morning. 3 Allow me to begin, if I could, by thanking 4 all of you for recognizing Anne Harvey this 5 morning. Obviously that meant a lot to her, 6 and it means a lot to all of the park 7 professionals. 8 I'd also add -- I can't allow 9 Veterans' Affairs to talk about some of their 10 outsourcing successes, without sharing just one 11 with you very quickly. 12 And because we were talking about parks 13 this morning, you may recall that we were able 14 to at DEP get an appropriation for 15 nine-and-a-half million dollars last year to 16 build 143 new cabins in all of the new State 17 parks that you as Trustees have been approving 18 and -- and supporting. 19 And one of the great sources of pride is 20 that we were able to outsource the construction 21 of all 143 cabins using private capital, 22 meaning that that 9.5 million dollars now, 23 rather than going into building buildings, can 24 be invested in improving the ecosystems and 25 improving the land in those State parks. ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 28 March 29, 2001 1 So it's a real win-win in terms of getting 2 the private sector involved as a partner, and 3 freeing up more money for actually restoring 4 the -- the actual environmental resource. 5 So that's the kind of work that Anne and 6 others are involved in. 7 There are some cabins in the park that 8 Anne Harvey manages. 9 Thank you for indulging me. 10 GOVERNOR BUSH: Thank you, David. 11 MR. STRUHS: Item 1, approval of the 12 minutes. 13 COMPTROLLER MILLIGAN: Move the minutes. 14 COMMISSIONER RHODES: Second. 15 GOVERNOR BUSH: Moved and seconded. 16 Without objection, it's approved. 17 MR. STRUHS: Item 2, there is a landowner 18 here, Eric Olsen, who would like to speak in 19 objection to this item. And I just wanted to 20 note that at the beginning, before you act too 21 quickly. 22 The issue here is a -- 23 GOVERNOR BUSH: We're known to do that, so 24 I appreciate you saying that. 25 MR. STRUHS: The issue here is, this is not ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 29 March 29, 2001 1 a sovereign submerged land lease, and I want to 2 make that very clear. This is not a lease. 3 This is instead a management agreement 4 between two governments, between the State of 5 Florida and Stuart. 6 There are mooring facilities off the coast. 7 Phase I and Phase II have already been built 8 and improved and are managed well, on your 9 behalf by the City of Stuart. They're now 10 ready to move into Phase III. 11 Phase III mooring is about 312 feet off the 12 property line of the individuals here who are 13 speaking in objection to the item. 14 They raise a number of riparian concerns, 15 not so much as it relates to ingress and 16 egress, but more to the obstruction or the 17 change of their waterfront view. Instead of 18 having open water to look at, they will have 19 moorings in -- in front of their home. 20 But, again, it's 312 feet off. And there 21 is an existing natural navigation channel 22 between the water's edge -- the land's edge and 23 the mooring site. 24 So I just wanted to give you a picture of 25 what we're talking about. ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 30 March 29, 2001 1 Our recommendation to the Board is to 2 approve this item subject to special 3 conditions, and recognizing that the City of 4 Stuart has been a good partner in -- in 5 managing this for you. 6 I'd like to invite then Mr. Eric Olsen to 7 represent his objections. 8 GOVERNOR BUSH: Welcome, Mr. Olsen. 9 MR. OLSEN: Thank you. 10 Eric Olsen, Hopping, Green, Sams & Smith. 11 I am not the land owner. I'm here 12 representing Ted Guy, who is the landowner. 13 Mr. Guy wishes he could have been here in 14 person, but unfortunately he had a conflict, 15 and couldn't make it here today, and is sorry 16 that -- that he wasn't able to do that. 17 As indicated by Secretary Struhs, Mr. Guy 18 is a riparian landowner where owning land in 19 which this mooring field will be located. 20 To give you a bit of background, the city 21 already has two mooring fields on the south 22 fork of the St. Lucie River, which are called 23 Phase I and Phase II. Both of these mooring 24 fields are located in front of City property. 25 And Mr. Guy has no objection to those ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 31 March 29, 2001 1 mooring fields, and, in fact, supported the 2 establishment of those mooring fields. 3 The City is now seeking authority to 4 establish a third mooring field called 5 Phase III. This third mooring field will be 6 located in front of Mr. Guy's property, as well 7 as in front of the property of several other 8 private land owners. 9 We suggest -- and the City will charge a 10 fee for individuals to moor their boats to the 11 mooring field. And for those of you who may 12 not be intimately familiar with navigation type 13 components for boat facilities, a mooring field 14 is simply a series of permanent anchoring 15 devices mounted out in a river or a -- in this 16 case, a -- an estuary type system where people 17 who are traveling with boats, can tie their 18 boat up to an established floating device, 19 sometimes a little buoy floating in the water, 20 instead and dropping their own anchor, and 21 anchoring their own boat on the bottom. 22 The reason for establishing mooring fields 23 is usually environmental, to keep people from 24 constantly anchoring in the water body, but 25 instead, use permanent devices, and reduce the ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 32 March 29, 2001 1 chance of bottom -- bottom damage. 2 And again, we don't have any problem with 3 Phase I and Phase II mooring fields which are 4 in place and established. 5 These mooring fields, I am told, are not 6 full. In fact, of the 69 moorings available, 7 only 22 are used right now. And that seems to 8 have been -- 9 GOVERNOR BUSH: Sixty-nine -- twenty-two 10 out of sixty-nine? 11 MR. OLSEN: Twenty-two out of sixty-nine. 12 Yes, Governor. 13 GOVERNOR BUSH: Is that because they're 14 smaller, or is there a particular reason? 15 Well, we'll find out, I'm sure. 16 MR. OLSEN: People don't want to pay to use 17 the mooring field. They'd rather -- there's 18 just not that much of a demand. 19 And some individuals still don't -- even 20 though the mooring field's available, still 21 don't want to use it, and want to anchor their 22 boats outside of the mooring field. 23 The Phase III mooring field will be between 24 my client's property and the dredge navigation 25 channel of this river. We're concerned about ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 33 March 29, 2001 1 that, because, number one, the City is not the 2 riparian owner, and in our pos-- in our 3 opinion, does not have the right to seek this 4 type of authorization for the mooring field. 5 Secondly, by locating the field in between 6 our property and the main dredge navigation 7 channel, the mooring field will interfere with 8 our riparian rights, our ability to navigate 9 from our property, to the dredge channel. 10 Now, there is deeper water between our 11 property and where the mooring field will be, 12 which is the channel Secretary Struhs was 13 referring to. But that's not the dredge 14 navigation channel. 15 This mooring field will be between our 16 property, and the dredge navigation channel, 17 and will interfere with our rights to navigate 18 out there. It will interfere with our view to 19 the navigation channel, which we submit is part 20 of our riparian rights. 21 And we're also concerned that -- 22 GOVERNOR BUSH: Are views part of riparian 23 rights? 24 MR. OLSEN: Yes. Under -- a riparian owner 25 has a right to unobstructed view of the ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 34 March 29, 2001 1 navigable channel under Florida's riparian 2 rights law. And we submit this will be located 3 in front of that, and it will interfere with 4 that. 5 There was a case a while back where DOT 6 built a bridge that obstructed a riparian 7 owner's view of the navigation channel. The 8 riparian owner sued DOT for inverse 9 condemnation and taking, and won. 10 The Court said, yes, they deprived the 11 owner of their riparian right to an 12 unobstructed view of the channel. And this is 13 all in the same -- 14 GOVERNOR BUSH: Great country. 15 MR. OLSEN: -- same type of lines. 16 But on a -- on a pragmatic sense, we're 17 concerned about the -- the possibility of 18 interference with our abilities to navigate to 19 the channel, and our ability to use this open 20 water for recreation. 21 And more importantly, that the mooring 22 field -- since the existing mooring fields are 23 not used fully, the new mooring field will also 24 not be used fully. 25 And people who don't want to pay will do ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 35 March 29, 2001 1 what they can to avoid the mooring field, which 2 means locating their boats closer to our 3 property line to anchor in the nonmooring field 4 area, and that'll present a greater chance of 5 derelict vessels coming in and interfering with 6 our docking facilities. 7 So we would ask you that you deny this. As 8 a compromise, we're willing to offer that if 9 some riparian owners are acceptable to this 10 mooring field, then reduce the size of it to be 11 located in front of the property of the 12 riparian owners who do favor it or support it. 13 Next to my client's property is a large 14 condominium. Many of the condominium owners 15 there, I'm told, have signed a petition 16 supporting the mooring field. 17 To the extent the mooring field is located 18 in front of their riparian rights, that'd be 19 fine. We don't have any objection to that. 20 But to the extent it's located -- 21 GOVERNOR BUSH: Do you think that -- 22 MR. OLSEN: -- in front of our -- 23 GOVERNOR BUSH: -- would sign up if that 24 was the case? 25 MR. OLSEN: -- we would -- we would not ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 36 March 29, 2001 1 like to have it in front of our property. 2 GOVERNOR BUSH: Probably not. 3 MR. OLSEN: That, in summary, is our 4 argument against it. It's not needed, it 5 interferes with our riparian rights. 6 We'd ask that you deny it or reduce its 7 size. And be happy to answer any questions. 8 And if you'd like, I can explain what the BOT 9 does, the Board of Trustees. 10 GOVERNOR BUSH: I -- I need to know that, 11 too, probably. But -- 12 I didn't know about riparian rights with 13 the views being -- of property rights. That's 14 pretty good. 15 MR. OLSEN: It is. 16 GOVERNOR BUSH: David, you want to come 17 and -- 18 COMPTROLLER MILLIGAN: Let -- let me ask a 19 quick question. I -- 20 MR. OLSEN: Sure. 21 COMPTROLLER MILLIGAN: -- I understand that 22 that area is used for mooring today. 23 MR. OLSEN: It is. 24 COMPTROLLER MILLIGAN: Routinely. 25 MR. OLSEN: Right. ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 37 March 29, 2001 1 COMPTROLLER MILLIGAN: What rights do the 2 owners that possess riparian rights have to 3 move or force the movement of people who just 4 come in there and moor anyway? 5 MR. OLSEN: I think under the navigation 6 law, I'm not -- afraid I'm not the total expert 7 in maritime. 8 But you have a right to use the open water 9 for navigation. To the extent that somebody 10 had anchored their boat right in front of my 11 client's property to interfere with his 12 navigation, to the extent he could prove that, 13 he could have the right to, in a private 14 action, have that individual remove that boat 15 to -- to support his riparian rights. 16 So the same thing would occur if people 17 anchored so many boats in front of the property 18 that you couldn't have access. You'd have a 19 private cause of action against those 20 individuals, since that would be not a 21 government sanctioned event -- 22 COMPTROLLER MILLIGAN: But it would be -- 23 it's a navigation issue. 24 MR. OLSEN: Right. 25 COMPTROLLER MILLIGAN: The boats that do ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 38 March 29, 2001 1 moor up and use that area for mooring, are you 2 better served in terms of your concerns about 3 derelict boats, or boats who are breaking 4 loose, and drifting in, and destroying peers, 5 or whatever? 6 Are you better served having mooring 7 points, as opposed to people just dropping 8 anchor? 9 MR. OLSEN: We're better served by the City 10 enforcing the existing derelict vessel law to 11 remove derelict vessels out there. And to the 12 extent that -- that that's not going to occur, 13 but instead, the mooring field will be 14 installed, we're better served by the mooring 15 field not being there, because in our opinion, 16 people who have derelict vessels out there, who 17 aren't actively maintaining the vessel, will 18 not certainly want to pay to attach the vessel 19 to a mooring field that costs money, but will 20 instead, move their vessels out of the mooring 21 field area, closer to our property, and 22 increase the probability of those vessels 23 breaking loose and damaging our dock. 24 COMPTROLLER MILLIGAN: Well, it's not just 25 derelict vehicles that can break loose -- ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 39 March 29, 2001 1 MR. OLSEN: It can be any vessel, right. 2 But again the -- the irresponsible boat 3 owner, if you will, will be less inclined to 4 tie their boat up to a mooring field that costs 5 money, and will be more likely -- 6 (Treasurer Gallagher entered the room.) 7 MR. OLSEN: -- to move out of the mooring 8 field, closer to the riparian property owners, 9 to avoid that very instance. 10 COMPTROLLER MILLIGAN: How accurate is your 11 22 out of 69? Is that a -- the routine number 12 approximate use of the -- of the -- of the 13 mooring field? 14 MR. OLSEN: Well, my client indicates 15 he's -- he contacted the City to get the 16 registration information recently, and that's 17 his estimate of -- of what it is. 18 COMPTROLLER MILLIGAN: Okay. Thanks. 19 GOVERNOR BUSH: Any other questions? 20 David? 21 Why are -- why is -- why are we expanding 22 this, or why is the City -- whoever's managing 23 it, why are they expanding this if there's 24 vacancies in the other mooring fields? 25 MR. STRUHS: I think the answer, in part, ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 40 March 29, 2001 1 Governor, is that Phase I and II have not yet 2 been I guess you could say officially opened to 3 the public. 4 The City is planning a grand opening to 5 advertise the fact that these new mooring 6 facilities in Phase I and II are going to be 7 available to the boating public. They haven't 8 marketed it yet, they haven't sort of done the 9 ribbon cutting. 10 The City believes, and I think with good 11 reason, that once their availability becomes 12 known, that the entire 69 moorings will be used 13 regularly. And, indeed, they're trying to get 14 this in front of the Board of Trustees in 15 anticipation of what they expect will be 16 growing demand. 17 So I think they're actually trying to be 18 prudent and -- and plan ahead for -- for that 19 expectation. 20 I would also point though, in terms of some 21 of the other issues as it relates to riparian 22 rights, the way we view and, indeed, I think 23 the way most people view riparian rights is 24 it's a bundle of rights. Some of them are more 25 important than others. ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 41 March 29, 2001 1 The issues of navigation in terms of 2 ingress and egress are, of course, the most 3 important. 4 The riparian right to a -- to a view is one 5 of those rights, but it's typically considered 6 less of a right. 7 Specifically it's governed by the location 8 of the channel. And one could think, 9 for example, if you were on a river, and you 10 were looking all the way across the river, and 11 somebody decided to put a pulp and paper mill 12 there, that would obviously change your view, 13 but it would not affect your riparian rights 14 because, indeed, it's on the other side of the 15 channel. 16 In this instance, there is a channel that 17 is regularly used for navigation between the 18 land's edge and the mooring facility. And I 19 would also suggest that moored sailboats and 20 motorboats are -- are not a gross insult to 21 the -- to the existing view. 22 GOVERNOR BUSH: David -- 23 Excuse me, General. 24 ATTORNEY GENERAL BUTTERWORTH: Governor, 25 Martin County and the City of Stuart I think ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 42 March 29, 2001 1 have been wonderful planners of -- of 2 facilities and -- and the land growth 3 management and everything -- 4 GOVERNOR BUSH: They have. 5 ATTORNEY GENERAL BUTTERWORTH: -- probably 6 more so -- definitely more so than my own 7 county. 8 I'll move the item as recommended. 9 GOVERNOR BUSH: Is there a second? 10 COMMISSIONER CRIST: Second. 11 GOVERNOR BUSH: Any other discussion? 12 Is there any objections? 13 COMPTROLLER MILLIGAN: I object. 14 GOVERNOR BUSH: I object as well. 15 So it passes. 16 Onward. 17 MR. STRUHS: Okay. 18 Substitute Item 3, recommending approval 19 subject to special lease conditions and the 20 payment of $8,705.95. 21 There is -- if I can just give you a little 22 bit of background on this. 23 This is the creation of 30 wet slips. As 24 part of that, they're getting rid of dry 25 storage. The net balance in terms of number of ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 43 March 29, 2001 1 vessels is -- is zero. It's a wash. 2 We have, as part of this item though, begun 3 discussions with the Fish and Wildlife 4 Conservation Commission, U.S. Fish and Wildlife 5 Service, and the County, and Save the Manatee 6 Club regarding potential improvements and 7 clarification of understanding in terms of what 8 manatee habitat actually is in this part of the 9 St. Johns River. 10 And those meetings and -- and discussions 11 will be scheduled shortly. 12 But as it relates to this specific item, we 13 don't have any objections to it. 14 GOVERNOR BUSH: Is there a motion? 15 COMPTROLLER MILLIGAN: I'll move the item. 16 TREASURER GALLAGHER: Second. 17 COMMISSIONER RHODES: Second. 18 GOVERNOR BUSH: Moved and seconded. 19 Any discussion? 20 Without objection, it's approved. 21 MR. STRUHS: Item 4, recommending approval 22 of the subject special to -- subject to special 23 approval conditions, special lease conditions, 24 and payment of $11,794.10. 25 This is an expansion of slips, an expansion ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 44 March 29, 2001 1 of 17, from 97 to 114. The number of slips on 2 sovereign submerged lands increases from 41 to 3 58. So it's all on State property. 4 One of the issues that is critical to 5 understanding this item is recognizing that 6 fuel will be dispensed from this facility for 7 marine use. This requires a variance, because 8 it is in an Outstanding Florida Water. The 9 applicant has, in our opinion, demonstrated a 10 navigation hardship, and it should be approved. 11 I would point out that as part of it, the 12 applicant has agreed to remove septic systems, 13 which will improve water quality in the area; 14 and providing pump-outs for all the vessels 15 that are using non-CCA treated pilings as 16 they -- as they construct the facility; they're 17 providing public education; and are providing a 18 slip to manage spill response in the event that 19 there was a contingency. 20 GOVERNOR BUSH: Where is the spill response 21 vessel located normally? 22 MR. STRUHS: I don't know. 23 GOVERNOR BUSH: Port of Miami or -- 24 MR. STRUHS: I don't know, Governor. I can 25 find out. ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 45 March 29, 2001 1 GOVERNOR BUSH: That's all right. It's not 2 a trick question. I mean -- 3 TREASURER GALLAGHER: I'll -- motion on the 4 item. 5 GOVERNOR BUSH: Is there a second? 6 COMMISSIONER RHODES: Second. 7 GOVERNOR BUSH: Any discussion? 8 Moved and seconded. 9 Without objection, it's approved. 10 MR. STRUHS: We are seeking to defer 11 Items 5. 12 TREASURER GALLAGHER: Motion to defer until 13 April 24th. 14 ATTORNEY GENERAL BUTTERWORTH: Second. 15 GOVERNOR BUSH: Motion to defer and a 16 second. 17 Without objection, it's deferred. 18 MR. STRUHS: We're seeking to defer 19 Item 6 -- 20 TREASURER GALLAGHER: Motion to defer it 21 till May 15th. 22 COMMISSIONER CRIST: Second. 23 GOVERNOR BUSH: There's a motion to defer 24 and a second. 25 Without objection, it's deferred. ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 46 March 29, 2001 1 TREASURER GALLAGHER: Motion to -- 2 COMPTROLLER MILLIGAN: All we -- 3 TREASURER GALLAGHER: -- withdraw nu-- 4 COMPTROLLER MILLIGAN: -- needed was the 5 Treasurer to speed things up, Governor. 6 TREASURER GALLAGHER: Motion to -- 7 COMPTROLLER MILLIGAN: All we needed was 8 the Treasurer to speed things up a little. 9 GOVERNOR BUSH: I know. 10 TREASURER GALLAGHER: Motion to withdraw 11 Item 7. 12 COMMISSIONER CRIST: Second. 13 GOVERNOR BUSH: There's a motion to 14 withdraw and a second of Substitute Item 7. 15 Without objection, it's approved. 16 It's Port of Miami. 17 MR. STRUHS: Thank you. 18 GOVERNOR BUSH: Item 8. 19 MR. STRUHS: Item 8, we're seeking your 20 approval of the acquisition of 12.9 acres. 21 This is an in-holding in one of our more 22 popular State parks, Homosassa Springs Wildlife 23 State Park. 24 We're paying about 95 percent of the 25 appraised value at a cost of $3300 per acre. ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 47 March 29, 2001 1 This is an important acquisition for a very 2 popular park. It's using what remains with the 3 Preservation 2000 dollars, and -- and is an 4 example of how that program has served the 5 State well. 6 GOVERNOR BUSH: It's timely you should 7 bring this here. 8 I'm glad that you brought this here on this 9 particular day, the day the Legislature is 10 passing a budget. 11 TREASURER GALLAGHER: Using up a bunch of 12 money. 13 GOVERNOR BUSH: Maybe we should have a 14 discussion about the impacts of the possible 15 legislative action on many of these programs 16 that we deal with. 17 Would that be appropriate, that we do that? 18 TREASURER GALLAGHER: Sure. 19 GOVERNOR BUSH: Is there a motion? 20 TREASURER GALLAGHER: I approve 8. 21 COMMISSIONER RHODES: Second. 22 GOVERNOR BUSH: Moved and seconded. 23 Without objection, it's approved. 24 GOVERNOR BUSH: David, do you want to give 25 us kind of a run-down on -- on the Senate's ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 48 March 29, 2001 1 proposed action, and maybe the House? I'm not 2 sure what they're doing, and -- and the impacts 3 it might have on programs that in-fill the 4 purchases like this and others that -- that is 5 your business. 6 MR. STRUHS: Yes -- yes, sir. 7 As you know, Preservation 2000 is -- is 8 wrapping up. And we are now moving into the 9 Florida Forever Program. 10 The Preservation 2000 program has been a -- 11 a national model -- indeed, an international 12 model of how to use resources well. 13 It's a program that is obviously very 14 popular with the public, has been operated for 15 a decade now without a hint of -- of scandal 16 or -- or any management problems. It is -- it 17 is winding down. 18 There is a small amount of money left out 19 of the 3 billion dollars that has been 20 committed through this program. The -- the 21 expectation and plan was to continue to work 22 through that Preservation 2000 list as we 23 transition into Florida Forever. 24 A recent budget amendment was introduced in 25 the Senate that would effectively stop that, ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 49 March 29, 2001 1 and remove that money from the program to apply 2 towards the State's Everglades restoration 3 commitment in lieu of the ten-year sustainable 4 funding plan that had been proposed by you, 5 Governor, and endorsed almost unanimously by 6 the Legislature just one year ago. 7 A number of concerns that obviously arise 8 from that action. Among them is the potential 9 impression that the statewide commitment to 10 Everglades restoration could be eroding because 11 of the change in that ten-year formula in -- in 12 year number two. 13 It also potentially gives rise to some 14 regional issues. One of the reasons I think 15 we've been successful as a State in advancing 16 Everglades restoration is because it's been 17 recognized that while a high priority for the 18 State, it would not be done at the expense of 19 other important conservation and environmental 20 agendas in other regions of the state. 21 To the extent that this P-2000 money, which 22 would be funding projects around the State is 23 now going to be set-aside exclusively for 24 Everglades, will potentially give rise to some 25 of those regional differences, which could ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 50 March 29, 2001 1 again long-term erode support for the overall 2 Everglades restoration agenda. 3 I'd also point out that, as you all know 4 well, that the Everglades partnership with the 5 Federal government is entirely different than 6 most water resource development projects. 7 Typically the State is responsible for the 8 land acquisition, the Federal government does 9 all the engineering, design, and construction. 10 By design, and -- and quite on purpose, we 11 felt that that's not how we wanted to move 12 forward with Everglades, it was too important, 13 we wanted to make sure the State's interests 14 were at the table at every point of the 15 decision making, and we were able to, through 16 negotiations with Congress, get the State in 17 the position of being a full partnership, not 18 just in acquiring land, but in terms of the 19 engineering and design and construction. 20 One of the problems, of course, with the 21 P-2000 money is that the bond covenants would 22 limit that money to be used exclusively for 23 land acquisition, and that could put -- create 24 a potential bad precedent in not having Florida 25 at the table as some of the early design work ACCURATE STENOTYPE REPORTERS, INC.

TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 51 March 29, 2001 1 is -- is actually being done. 2 There are other points as well. But why 3 don't I stop there and address any questions 4 you may have. 5 GOVERNOR BUSH: Any questions? 6 What -- what is the balance -- that -- part 7 of the confusion that we've had is an apparent 8 disagreement of the balance of 9 Preservation 2000 monies that could be 10 available for use in a different way. 11 What is -- what is the balance that is 12 unencumbered right now? Or -- 13 MR. STRUHS: Right. 14 GOVERNOR BUSH: -- I mean, right now 15 plus -- till July 1st. I mean, I'm curious to 16 know -- 17 MR. STRUHS: As -- as you all know well, it 18 is difficult to say with precision exactly what 19 it will be down to the nickel because, in fact, 20 you as a Board of Trustees make decisions every 21 other week that affect what that number will 22 ultimately look like. 23 Our -- our most conservative projections 24 suggest that by the end of the fiscal year, 25 June 30th, there will be approximately 70 to ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 52 March 29, 2001 1 71 million dollars left in that account. 2 I think it's important to put that number 3 in an appropriate context. If -- if you think 4 of this as a 3 billion dollar ten-year program, 5 and you're trying to manage the program so that 6 when you get to the finish line, you are as 7 close to zero as possible without going over, 8 this is about in that 2 percent range. 9 So it's -- it's not -- it's not -- not bad 10 in terms of getting close to where we need to 11 be. Of course, the problem is that that 70 to 12 71, 72 million dollars is now removed from that 13 project. That money is no longer available for 14 a number of projects that are in cue ready for 15 your consideration as a Cabinet for -- for 16 conservation. 17 GOVERNOR BUSH: Have you provided a list to 18 us and to the Legislature of -- of those 19 projects that would have to be deferred? 20 MR. STRUHS: Yes, we have. And I'd be 21 happy to make sure that all the members of the 22 Cabinet have it. 23 GOVERNOR BUSH: What is the out-- 24 outstanding balance today? Put aside what -- 25 MR. STRUHS: You know, I -- I -- I left it ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 53 March 29, 2001 1 in my briefcase. I can't -- I can't recall the 2 precise -- 3 COMPTROLLER MILLIGAN: Governor, while 4 they're -- while they're tracking that down, 5 you know, this is not a new conversation. 6 Recently we talked about how we were bonding 7 these dollars, and the fact that it appeared 8 that we had money hanging out. 9 And Ben Watkins is not here to -- to 10 perhaps readdress that issue. 11 But I -- I -- I think it's an issue that we 12 might not want to let die on how we do the 13 bonding, because if -- if they're going to 14 attack now, they'll attack again in the future 15 whenever there's a money crunch. 16 And -- and I think we can do a -- 17 GOVERNOR BUSH: Absolutely. 18 COMPTROLLER MILLIGAN: -- better job at 19 protecting those resources, somewhat through 20 the bonding process that we use. 21 GOVERNOR BUSH: Absolutely. 22 Or staging purchases -- extending contracts 23 for purchase in the earlier part of the -- the 24 year, fiscal year, out longer; and shortening 25 the closings at the end part of the year so ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 54 March 29, 2001 1 that -- or -- or -- you know, so that you have 2 simultaneous closings or as close as you can 3 between the issuance of the bonds and the 4 purchase of the land. 5 It might make for a long -- maybe change 6 our structure here a little bit. But I -- 7 COMPTROLLER MILLIGAN: Yeah. 8 GOVERNOR BUSH: -- man, I think David, to 9 his cre-- I mean, I've been -- based on our 10 conversations that we've had in the past, have 11 gotten all over him on this actually. 12 COMPTROLLER MILLIGAN: Well -- 13 GOVERNOR BUSH: And I think they've done a 14 little bit better job. But it's still 15 something that we need to do better on. 16 That's -- 17 TREASURER GALLAGHER: If I -- if I can just 18 say, Governor. 19 I think if you would ask, how much money 20 are we going to need to finish the land 21 acquisition for environmental reasons, it's 22 unending. 23 I mean, there are a tremendous number of 24 acres in this state that -- that would make a 25 lot of sense for us to own that are still ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 55 March 29, 2001 1 pristine, and -- and we could save them from -- 2 from development. 3 And the problem always is to prioritize 4 those, which is on a continuing process. And 5 as soon as you grab money out of this process, 6 there are some things that are going to end up 7 on that priority list, and certainly on the 8 list that aren't going to get funded until a 9 long time from now, which means they could end 10 up being developed instead. 11 So it is a critical thing that we're doing 12 here, and -- you know, taking a million out -- 13 out of it is not a good thing. 14 COMPTROLLER MILLIGAN: But I -- but I will 15 say again, Governor, I think that there is a 16 method that we can put in place on the bonding 17 side so that the resources come available as 18 they are needed, as opposed to sitting in a 19 trust fund -- 20 GOVERNOR BUSH: Absolutely. 21 COMPTROLLER MILLIGAN: -- where they pop up 22 on the screen and be several hundred 23 million dollars that somebody thinks they can 24 lay their hands on. 25 TREASURER GALLAGHER: Well -- ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 56 March 29, 2001 1 COMPTROLLER MILLIGAN: So I -- I would move 2 that we -- that we ask Bond Finance to revisit 3 this issue, and come back to us with a -- a 4 means through which perhaps this next ten-year 5 process we can do a better and -- and cleaner 6 job on the bonding side. 7 TREASURER GALLAGHER: Well, if I may add to 8 that, we -- we could do, you know, smaller 9 issues more often. 10 But many times you get a better deal if 11 it's a larger issue. It's very easy to put in 12 the bond documents that this money's to be used 13 for, this program, period. 14 COMPTROLLER MILLIGAN: Well, that may very 15 well be the way we handle it. But -- 16 GOVERNOR BUSH: By the way, is that what -- 17 is it not in there now? That might be an 18 interesting -- 19 TREASURER GALLAGHER: Well -- 20 GOVERNOR BUSH: -- question -- 21 TREASURER GALLAGHER: -- it's a land 22 acquisition. It doesn't aim it close enough I 23 think is the problem. 24 MR. STRUHS: Yeah. 25 COMPTROLLER MILLIGAN: Yeah. But that's a ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 57 March 29, 2001 1 good comment, Tom. And -- and I think we -- we 2 need to have Bond Finance look at how we can 3 better seal the -- the bank on this 4 particular -- 5 TREASURER GALLAGHER: That's -- that's one 6 thing. It doesn't -- that way we're not 7 restricted on -- because we want to go to the 8 market when the market's right, and get as much 9 as we can, and not, you know, do it every time 10 we have a project. 11 But if it was for only those that are on 12 this list and approved by us, that will put a 13 halt to this kind of -- 14 COMPTROLLER MILLIGAN: Yeah. But there are 15 ways of phasing, we do phase now in a number of 16 bonding issues that work to our advantage. And 17 so that's a -- a tradeoff that I think we might 18 have to take a look at. 19 So I -- I move that we ask Bond Finance to 20 take a look at this issue, and come back with 21 us the best way that we can kind of -- 22 GOVERNOR BUSH: Can we -- 23 COMPTROLLER MILLIGAN: -- lock this up. 24 GOVERNOR BUSH: -- General, can we do it 25 also in the context of just receiving a review ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 58 March 29, 2001 1 of how we purchase the land as well, so we have 2 both together? 3 COMPTROLLER MILLIGAN: Absolutely. 4 TREASURER GALLAGHER: I'll second his 5 motion, with that included. 6 GOVERNOR BUSH: There's a motion and a 7 second. 8 Any other discussion on -- 9 MR. STRUHS: I -- I would -- 10 GOVERNOR BUSH: It's not an agenda item, 11 but we're -- 12 MR. STRUHS: Well, I would just add from -- 13 from -- from the staff perspective, one of the 14 balances we -- we continually try to strike 15 is -- and -- and I think we have improved 16 substantially the -- the past couple of years, 17 but there's always room for more improvement. 18 I think the idea of -- of not bonding money 19 prematurely is -- is clearly something that 20 deserves further consideration. 21 On the other hand, I don't want to see our 22 land acquisition, land management agencies get 23 into the position where they are judge-- 24 success is determined solely by how fast they 25 spend money. ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 59 March 29, 2001 1 Because if you -- if you create the 2 dynamics that they're judged how quickly they 3 spend money, it -- it lessens their ability to 4 be more businesslike in seeking the very best 5 values for the State. 6 So it is -- it is requiring that kind of 7 balance. 8 COMMISSIONER CRIST: Governor -- 9 GOVERNOR BUSH: Yes. 10 COMMISSIONER CRIST: -- I think -- I think 11 the concern I sense from you, and -- and 12 certainly one that I -- I have is that the 13 original intent of P-2000 is respected. 14 And that -- though we honor the integrity 15 of that plan, and I think that the General's 16 motion will -- will help us get there. 17 GOVERNOR BUSH: I -- I have -- I have three 18 concerns. I have the -- the concern about our 19 own responsibilities of cash management and 20 purchase of land, which is an ongoing 21 responsibility we all take very seriously. 22 I have a concern about our relationship 23 with Washington that is -- we've created -- I 24 don't think people fully appreciate the unique 25 relationship that has been created with this -- ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 60 March 29, 2001 1 with the Everglades Restoration Act. And 2 anything that sends a signal that imperils that 3 concerns me greatly. 4 I'm concerned about using bonded money for 5 things that should be paid for out of general 6 revenue. And I might add, recurring general 7 revenue. 8 Last year, we proposed in our budget, 9 recurring general revenue dollars to pay for 10 this, and 50 million I believe of it, was -- 11 came back in the form of a nonrecurring source 12 of money, and so we proposed again using 13 recurring monies. 14 And now we're going away from even cash to 15 debt, which is effectively just saying, 16 you know, we're -- we're going to spend a lot 17 more money on other things. And further indebt 18 the State, which -- which is -- I'm concerned 19 about a lot of this stuff. 20 And, you know, the press has depicted our 21 budget being one of -- of -- of really lean 22 times. I think people in our state probably 23 think that we're actually cutting the budget 24 this year from last. The -- the size of this 25 year's budget is actually less than -- than ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 61 March 29, 2001 1 last year's. 2 And, in fact, the Senate budget that 3 probably will be passed today is a 5.9 percent 4 increase, all funds budget; and the House 5 budget's about a 5 percent increase over last 6 year. 7 If family income grows that fast this year, 8 we'll celebrate. 9 And so I -- I just -- there -- there's 10 ample resources to do this the right way, and 11 I -- I -- as respectful as I can be to our 12 partners in our Legislature, we're asking them 13 to reconsider. 14 COMMISSIONER CRIST: Yes, sir. 15 ATTORNEY GENERAL BUTTERWORTH: Governor, I 16 think perhaps -- perhaps you're right on this 17 issue. The -- to fund the Everglades, we -- we 18 made a promise to the Federal government. And 19 I think we have to uphold that promise. 20 GOVERNOR BUSH: Any other comments? 21 David, did you ever get that answer to 22 that -- the mystery question? The briefcase 23 been found? 24 MR. STRUHS: Yes, sir. 25 What might be -- what might be most useful, ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 62 March 29, 2001 1 if I -- if I would -- 2 GOVERNOR BUSH: You don't want to answer my 3 question? 4 MR. STRUHS: No. I -- I'm -- 5 GOVERNOR BUSH: It's a simple -- 6 MR. STRUHS: -- I'm -- I'm happy -- I'm 7 happy to answer it. 8 GOVERNOR BUSH: Hence the problem. 9 TREASURER GALLAGHER: I know he wants to 10 answer it. 11 MR. STRUHS: The -- the issues -- these 12 things are always a bit more complex than -- 13 GOVERNOR BUSH: I know. 14 MR. STRUHS: -- you would think. I'd be 15 happy to visit each one of you personally, and 16 explain this spreadsheet to you. 17 But remind me specifically what your -- 18 GOVERNOR BUSH: The question was just what 19 today is the outstanding balance in 20 Preservation 2000, and what has -- what is 21 encumbered between now and July 1st? 22 And is there 100 million dollars, or are we 23 going to have to cut back on other projects -- 24 it'll be three questions. 25 The first question though is what's the ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 63 March 29, 2001 1 balance today? 2 MR. STRUHS: Well, it depends on whether or 3 not you approve Item 9, I guess. 4 GOVERNOR BUSH: What's the item yesterday? 5 What was the balance yesterday? 6 MR. STRUHS: I don't -- I don't have that 7 right in front of me. But -- 8 GOVERNOR BUSH: All right. 9 MR. STRUHS: -- I can -- I can -- I can 10 tell you that the rate that the money's being 11 obligated, if you look at money encumbered, 12 agenda items that are before you today, 13 agreements that have already been signed, 14 projects in which price has already been 15 established and negotiated, that by June 30th, 16 there is not 100 million dollars in the 17 account. 18 So -- 19 TREASURER GALLAGHER: That's seventy-one, 20 right? 21 GOVERNOR BUSH: Okay. That's -- that's the 22 answer to number three -- question number 23 three. 24 I was just curious to question number one, 25 because that's the question that I think the ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 64 March 29, 2001 1 appropriators are looking at. The answer to 2 that question is what they -- they're looking 3 at, not what you're committing to now. 4 We'll -- later. 5 MR. STRUHS: We'll -- we'll get that to 6 you. 7 GOVERNOR BUSH: Okay. Thank you. 8 ATTORNEY GENERAL BUTTERWORTH: -- for the 9 government. 10 TREASURER GALLAGHER: Motion on Item 9. 11 ATTORNEY GENERAL BUTTERWORTH: Second. 12 MR. STRUHS: We're recommending approval on 13 Item 9, which will -- 14 GOVERNOR BUSH: There's a motion and a 15 second. 16 Without objection, it's approved. 17 MR. STRUHS: Thank you. 18 Item 10 -- 19 TREASURER GALLAGHER: Motion on 10. 20 ATTORNEY GENERAL BUTTERWORTH: Do you have 21 to go somewhere, Tom? 22 GOVERNOR BUSH: You got a -- going 23 someplace? 24 TREASURER GALLAGHER: I've got Cab-- I've 25 got a Legislature -- ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 65 March 29, 2001 1 GOVERNOR BUSH: Is there a -- 2 MR. STRUHS: We -- we -- we've done the 3 math, it's just slightly over 100 million 4 dollars today. 5 GOVERNOR BUSH: Okay. Just -- I thought it 6 was appropriate to bring that up, because in 7 fairness to the appropriators, they're looking 8 at that. 9 And that's the -- that's the dilemma we 10 face, General, that you've brought -- pointed 11 out, and I -- 12 COMPTROLLER MILLIGAN: Sure. 13 GOVERNOR BUSH: -- and I think it's worthy 14 of -- that's why the -- the -- the motion you 15 made and the -- the mission now that we have is 16 an important one for next year. 17 Thank you. 18 MR. STRUHS: Thank you. 19 GOVERNOR BUSH: There's a motion on 20 Item 10? 21 Is there a second? 22 ATTORNEY GENERAL BUTTERWORTH: Second. 23 GOVERNOR BUSH: Any discussion? 24 Moved and seconded. 25 Without objection, it's approved. ACCURATE STENOTYPE REPORTERS, INC.
TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 66 March 29, 2001 1 MR. STRUHS: Thank you all. 2 GOVERNOR BUSH: Thank you, David. 3 (The Board of Trustees of the Internal 4 Improvement Trust Fund Agenda was concluded.) 5 * * * 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ACCURATE STENOTYPE REPORTERS, INC.
AGRICULTURE & CONSUMER SERVICES 67 March 29, 2001 1 GOVERNOR BUSH: Department of Agriculture. 2 MR. WILHELM: Good morning. 3 GOVERNOR BUSH: Good morning. 4 MR. WILHELM: Item Number 1 is the 5 Alligator Harbor selection process. This item 6 was deferred from the February 27th Cabinet 7 meeting in Tampa. 8 Based upon the comments received there and 9 the comments of interested persons, staff 10 recommends the following motion be adopted by 11 the Board: 12 The application process for Alligator 13 Harbor be on a first-come, first-served basis, 14 with Franklin County residents having first 15 priority; Wakulla County residents, second 16 priority; and preference being given to 17 first-time leaseholders. 18 Staff believes this motion will assure that 19 this economic development project will reside 20 with the local constituency. 21 TREASURER GALLAGHER: Motion on one as 22 described. 23 COMPTROLLER MILLIGAN: Second. 24 GOVERNOR BUSH: Moved and seconded. 25 Any discussion? ACCURATE STENOTYPE REPORTERS, INC.
AGRICULTURE & CONSUMER SERVICES 68 March 29, 2001 1 Without objection, it's approved. 2 I think it's a good strategy to provide 3 priority for the local residents. 4 MR. WILHELM: Just -- we did have from 5 Franklin County, Commissioner Cheryl Saunders 6 (sic) here -- 7 GOVERNOR BUSH: Commissioner, where are 8 you? 9 MS. SANDERS: I'm right here. 10 TREASURER GALLAGHER: There she is. 11 GOVERNOR BUSH: Great to see you. 12 We already approved it. 13 You want to speak anyway. 14 MS. SANDERS: You know, Governor, I'm never 15 at a loss for words. 16 GOVERNOR BUSH: I -- 17 MS. SANDERS: Now that's -- 18 GOVERNOR BUSH: -- I realize that when -- 19 MS. SANDERS: That's absolutely the truth, 20 being from Franklin County. 21 GOVERNOR BUSH: You came all the way to 22 Tampa, so you can come back and talk again. 23 MS. SANDERS: That's right. That's right. 24 And this -- like I said, I emphasized at 25 the beginning, and I'd like to say, I -- I'm ACCURATE STENOTYPE REPORTERS, INC.
AGRICULTURE & CONSUMER SERVICES 69 March 29, 2001 1 proud to see Commissioner Rhodes here. She 2 wasn't down in Tampa. She was sick then. I'm 3 glad you're better. 4 This is a good project for Franklin County, 5 Governor, and Cabinet. I'm still working 6 behind it. And I'm still going to be working 7 behind it before it's all over with. 8 And, in fact, they're wanting to name it 9 Cheryl's Clams. 10 So if you -- if you go down 98, down there 11 at Alligator Harbor, and you see a big sign 12 that says Cheryl's Clams, when I'm dead and 13 gone, you'll know that this woman stood before 14 this Governor and Cabinet, and told you how 15 important it was for Franklin County. 16 GOVERNOR BUSH: Thank you, Commissioner. 17 MS. SANDERS: Thank you. 18 Do you use hot sauce on those clams? Do 19 you use, like hot sauce, or -- 20 MS. SANDERS: Sir? 21 GOVERNOR BUSH: What do you put on your -- 22 how do you -- 23 MS. SANDERS: No. I have never -- 24 GOVERNOR BUSH: You've never eaten them? 25 MS. SANDERS: That's oysters you do that. ACCURATE STENOTYPE REPORTERS, INC.
AGRICULTURE & CONSUMER SERVICES 70 March 29, 2001 1 GOVERNOR BUSH: Oh, I put -- 2 MS. SANDERS: Now, I know about -- 3 GOVERNOR BUSH: -- hot sauce on everything, 4 girl. 5 MS. SANDERS: -- oysters, too. 6 Yeah. This is mainly going to be -- from 7 what I gather, it's going to be something like 8 pasta clams. Yeah. 9 And I never have ate -- 10 GOVERNOR BUSH: Fru-fru food. 11 MS. SANDERS: -- pasta clams before. 12 This is a -- this is a -- this is a new 13 experience from Franklin County, and on -- 14 GOVERNOR BUSH: You're going international. 15 MS. SANDERS: I know. I know. 16 GOVERNOR BUSH: That's great. 17 MS. SANDERS: But on -- I would like to say 18 this, because I am an ambassador from 19 Franklin County. 20 On April 11th, we will be having 21 Franklin County Day. And I'm going to set up a 22 booth with a coming attraction to 23 Franklin County, and that's the clams. 24 GOVERNOR BUSH: Excellent. 25 MS. SANDERS: So come down and see us on ACCURATE STENOTYPE REPORTERS, INC.
AGRICULTURE & CONSUMER SERVICES 71 March 29, 2001 1 April 11th. 2 GOVERNOR BUSH: Thank you very much for 3 being here. 4 MS. SANDERS: See ya later. 5 GOVERNOR BUSH: Yes. 6 Did we have a motion and a second? 7 I think we did. 8 TREASURER GALLAGHER: Yeah, it's done. 9 GOVERNOR BUSH: It's done. 10 MR. WILHELM: Thank you. 11 That was all. 12 GOVERNOR BUSH: That's it. 13 MR. WILHELM: Yes, sir. 14 GOVERNOR BUSH: Thank you. 15 (The Department of Agriculture & Consumer 16 Services Agenda was concluded.) 17 * * * 18 19 20 21 22 23 24 25 ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 72 March 29, 2001 1 GOVERNOR BUSH: Y'all can leave if you -- 2 unless you want to stick around and talk about 3 bundled providers. 4 State Board of Administration. 5 I'm sure -- 6 TREASURER GALLAGHER: Motion on the 7 minutes. 8 COMPTROLLER MILLIGAN: I will second the 9 minutes. 10 GOVERNOR BUSH: There's a motion and a 11 second. 12 Without objection, it's approved. 13 MR. HERNDON: Item Number 2 is a report on 14 the alternative investment asset class, and 15 some recommendations for modification to the 16 total fund -- 17 (Attorney General Butterworth and Secretary 18 Harris exited the room.) 19 MR. HERNDON: -- investment plan. 20 Governor and members, we had initially 21 planned to have a presentation this morning on 22 alternative investments to lead into Items 2 23 and 3. 24 We are recommending Item 3 be deferred. 25 But if it's agreeable, we'd still like to go ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 73 March 29, 2001 1 ahead and give you this presentation on private 2 equity. I think it's important that you have 3 this backdrop. 4 And then a few brief remarks on the 5 amendment to the total fund investment plan. 6 I might add that this issue was discussed 7 in front of our Advisory Council a couple of 8 weeks ago, and was approved by them, and hence 9 is before you today. 10 With your permission, we'll go ahead and 11 ask Bill James, who's Chief of our alternative 12 investments asset class to come up. 13 And we've got some presentation booklets 14 for you -- 15 GOVERNOR BUSH: Thank you. 16 MR. HERNDON: -- this morning. 17 I think you'll find this to be of interest. 18 It's not an asset class. It gets a lot of 19 attention, but a very unique investment. 20 And without any further delay, let me get 21 Bill James. 22 MR. JAMES: Thank you very much, 23 Governor Bush, Controller Milligan, and 24 Treasurer Gallagher. 25 As you know, in -- late in 1999, the Board ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 74 March 29, 2001 1 passed an amendment to the investment plan of 2 the FRS, which created -- amongst other acts, 3 it created the alternative investments asset 4 class with an initial weighting of 5 two-and-a-half percent of the fund. 6 At that point in time, I was named head of 7 the department, and we funded that department 8 with about 2.4 billion dollars worth of private 9 equity holdings that formerly had been in the 10 domestic equity asset class. 11 So it was split out from the other side of 12 the operation. 13 And at this point in time, we thought it 14 was a good idea to give you a review of where 15 the asset class has gone from then, and to give 16 you a little perspective on alternative 17 investments, say, in the market in general. 18 On page 3 of the handout, you'll see we've 19 laid out what's traditionally considered to be 20 the investment types that you find in all -- 21 alternative investments. 22 The first four, leverage buy-outs, growth 23 financing, venture capital, and Mezzanine 24 Capital generally are considered to be part of 25 traditional private equity. ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 75 March 29, 2001 1 Most of our holdings are concentrated in 2 leverage buy-out positions, and we have a very, 3 very small position in Venture Capital. 4 There are a variety of other strategies 5 that are pursued, some of which are 6 derivative-based strategies, including hedge 7 funds and managed futures and investments in 8 timber, oil, and gas, and distress debt. 9 In addition to that, real estate quite 10 often is viewed by the market as being part of 11 alternative investments, but at the Board, it's 12 a separate asset class with its own allocation. 13 The graph shows over the past ten years how 14 much capital has been committed to alternative 15 investments as a whole. And you see during the 16 '90s, there was huge growth. 17 Early in the decade, it averaged about 18 10 billion dollars worth of commitments per 19 year. 20 And obviously in the late '90s, since the 21 market's really exploded, it was in the 100 to 22 150 billion dollar range. 23 Clearly 2001 is going to be a much slower 24 year in term of commitments. 25 TREASURER GALLAGHER: Could I -- could I ACCURATE STENOTYPE REPORTERS, INC.

STATE BOARD OF ADMINISTRATION 76 March 29, 2001 1 interpret you just one second, if I may? 2 MR. JAMES: Sure. 3 TREASURER GALLAGHER: Governor, if I could, 4 I'd -- want to have our students here from the 5 2001 Presidents' Fest in the Park Essay Contest 6 winners. 7 GOVERNOR BUSH: Whew hoo. 8 TREASURER GALLAGHER: They're all sitting 9 right here. And -- 10 (Applause.) 11 TREASURER GALLAGHER: The Presidents' Fest 12 in the Park Second Annual Public School Essay 13 Contest was conducted in all public elementary 14 schools and middle schools, which comprise the 15 Western Innovative Zone. The subject of the 16 essay contest this year was, appropriately, 17 Your Vote Counts. 18 The goal of the Presidents' Fest 19 Educational Committee was for students, with 20 the support of their teachers and families, to 21 utilize the skills which they have been taught 22 in the classroom to prepare their essay. 23 Guidelines for the essay contest were 24 distributed to each public school principal, 25 several community leaders, and representatives ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 77 March 29, 2001 1 of local businesses involved in the Partners in 2 Education agreed to our -- serve as judges for 3 the contest. 4 The essays were reviewed for creativity, 5 organization, style, and reasoning. 6 And so we certainly welcome you to the 7 State Capitol, and we're very glad you're here. 8 And it's Caitlan Chase, Claire Ferguson, 9 Monica Martinez, Alana Murphy, Ursula Raygoza, 10 Nicholas Stiegler, Andrea Tahmooressi -- I'm 11 close there I guess maybe. 12 -- Devasia Washington, and Alex Eisenberg. 13 GOVERNOR BUSH: And Ken Plante. 14 TREASURER GALLAGHER: And Ken Plante. And 15 the trip chaperones are -- 16 He's been writing a lot of essays since he 17 left the Governor's office, I know that. 18 And I also thank Doug Iscovitz and 19 Shari Stupp, Debi Levy, Joel Fass, and 20 Rhonda Murphy for being the trip chaperones. 21 Thank you for coming by and visiting our 22 Cabinet meeting. 23 GOVERNOR BUSH: Thanks for being here. 24 MR. JAMES: Page 4 of the presentation lays 25 out our peers in the public arena. And in ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 78 March 29, 2001 1 general, as you can see, the allocations in the 2 target column for all of the pension funds are 3 generally at our level or higher. 4 What you see here on the right-hand column 5 is the total fund size to put it in 6 perspective. 7 The first ten public pension funds are the 8 top ten in order, including the Florida State 9 Board at number 4. 10 And allocations of that group probably 11 average in the 5 to 6 percent range. And as 12 you get into the funds that are in the 20 to 13 50 billion dollar range, it's not uncommon to 14 see alternatives allocations between 10 and 15 20 percent. 16 COMPTROLLER MILLIGAN: You mentioned that 17 real estate was included in alternative 18 investments, in most -- in many states, or all 19 states. 20 MR. JAMES: In many states. It's different 21 from fund to fund, but -- 22 COMPTROLLER MILLIGAN: You know, I -- 23 you know, I look at CalPERS, 6 percent. Is 24 that -- 25 MR. JAMES: Does not include -- ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 79 March 29, 2001 1 COMPTROLLER MILLIGAN: -- do they include 2 real estate? 3 MR. JAMES: No. When we did the survey, we 4 intentionally excluded real estate so -- 5 GOVERNOR BUSH: Okay. I -- 6 MR. JAMES: -- there'd be an apples to 7 apples comparison. 8 COMPTROLLER MILLIGAN: Okay. Thank you. 9 GOVERNOR BUSH: When you say they're 10 target. I mean, our target's two-and-a-half. 11 But you're -- you're at 4 percent now? 12 MR. JAMES: We're about 3.7 at this point. 13 Depends on how the public markets are doing 14 from day to day. 15 GOVERNOR BUSH: Right. 16 I mean, this is more -- this -- this 17 particular area of investment is more -- the 18 percentages are more related to what's going on 19 with the denominator, not the numerator. 20 MR. JAMES: To a certain extent, that's 21 true, because of value. 22 TREASURER GALLAGHER: Right. 23 And you can't change the one year there. 24 It's not -- when you deal with the other -- 25 COMPTROLLER MILLIGAN: Keep going -- ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 80 March 29, 2001 1 TREASURER GALLAGHER: -- asset classes, 2 when the stock market's going down, you buy, 3 and -- and when it's going up, you sell, to 4 keep them even. 5 You can't -- this one's sort of -- you've 6 made the investment, you hold it. You don't -- 7 there's no market to sell it. But over the 8 period of time, it has a good return. 9 GOVERNOR BUSH: We hope. 10 TREASURER GALLAGHER: We hope. 11 COMPTROLLER MILLIGAN: We hope. 12 That's right. 13 TREASURER GALLAGHER: Well, if they make 14 the right decisions, they do. 15 GOVERNOR BUSH: So it's a little more of 16 a -- 17 COMPTROLLER MILLIGAN: Well, when we talked 18 about -- about this back in '99, you know, the 19 discussion revolved around risk and -- and how 20 risky this was, and why we hadn't been involved 21 in it before was because of risk. We've 22 enjoyed obviously some pretty good return here. 23 But it is still risky. 24 MR. JAMES: Page 5 gives you an 25 introduction to the usual private equity deal ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 81 March 29, 2001 1 structure. 2 We work through limited partnerships, or we 3 try to mimic limited partnerships, or have in 4 the past when we didn't have partnership 5 authority. 6 And the partnership generally is made up of 7 a general partner and a variety of limited 8 partners. We have as few as one, and as many 9 as 100 in some of these funds. 10 The role of the general partner is to 11 source investments, to sort through the 12 opportunities that are out there, and to make 13 purchase decisions on behalf of the limited 14 partners to manage those investments. And 15 these are generally control investments in the 16 LBO portfolios that predominate our portfolio. 17 And then to exit those investments, and 18 there are a variety of strategies there. 19 IPO, obviously an initial public offering 20 of stock. They then have to manage the exit 21 from the -- from the public stock position. A 22 strategic or financial sale to a -- to a buyer 23 is clearly what we prefer, because that 24 generally produces cash right away. 25 The LP role, that would be our role, ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 82 March 29, 2001 1 includes obviously what they're most interested 2 in -- and that's a provision of capital. But 3 we also provide a very important due diligence 4 role in resolving valuation issues and 5 conflicts of interest. 6 Generally, these partnerships are ten years 7 in length. They can be extended a year or two 8 for the purposes of disposing of assets that 9 remain at the end of the time period. 10 The graph on the right will give you an 11 idea of generally the time frame of how funds 12 move in and out of those partnerships. The red 13 graph, as you can see, which starts at zero, 14 and generally goes back to zero by year 6, is 15 the time frame when the investments are made. 16 They're generally completed within the first 17 six years of the partnership's life. 18 So the money is -- is rolling out to the 19 general partner during that time period you get 20 invested. 21 Distributions from the account are in 22 green, and they generally start very, very 23 slowly, and -- and predominate from year 6 on, 24 resulting in the portfolio value graph that you 25 see that's in light blue, which peaks around ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 83 March 29, 2001 1 year 6, and then falls off. 2 So if we made one investment in one general 3 partnership, generally what would happen is the 4 portfolio value would start at zero, we'd have 5 a commitment. 6 In this case, that graph was driven for 7 100 million dollar commitment. 8 And the portfolio value would peak 9 somewhere around 90 -- 90 million dollars, and 10 then would fall off and reach zero at the end 11 of the partnership length. So it's important 12 for us to continue to invest in partnerships 13 through time, to keep the percentage of the 14 fund stable. 15 Page 6 shows the normal path that the rate 16 of return of those portfolios follow. Given 17 the fact that there are very few distributions 18 early in the life of the partnership, and 19 valuation procedures are generally very, very 20 conservative, most investments are held at cost 21 through the first three to four years, it 22 generally has a negative rate of return for the 23 first two to three years, somewhere around zero 24 potentially. 25 If you hit an early home run with a -- a -- ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 84 March 29, 2001 1 a deal that matures quickly, you can beat your 2 benchmark during that time period. 3 But predominantly, year 5 and 6 is when you 4 begin to see a stabilization of the rate of 5 return for this long run value. 6 It's referred to as the J-curve because of 7 it's shape. And our benchmark is structured to 8 follow that. 9 Go on to page 7, you'll see the history of 10 the SBA's involvement. And -- and this is a 11 longer history than the asset class in private 12 equity, and then alternative investments. 13 The first -- the first partnership, which 14 we really invested as a side-by-side in an 15 investment management relationship is now 16 closed. Corporate Advisors was opened in 17 1988 -- 18 TREASURER GALLAGHER: Wasn't that with 19 Lazard? 20 MR. JAMES: That was with Lazard. 21 TREASURER GALLAGHER: Right. 22 MR. JAMES: It's a strategy that's not one 23 that we would follow at this point in time. 24 We had a very difficult time getting into the 25 market then without having partnership ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 85 March 29, 2001 1 authority. 2 And so we had a side-by-side -- generally, 3 there were public instruments, and we generally 4 do not invest in special situations, portfolios 5 of that type. 6 TREASURER GALLAGHER: But I -- I those -- 7 at least the few that I knew about were quite 8 profitable. There may have been some that 9 weren't. 10 MR. JAMES: Uh-hum. 11 TREASURER GALLAGHER: The ones I remember 12 were very -- 13 MR. JAMES: Well, I'd like to say that was 14 our experience. 15 Corporate Advisors fell significantly 16 behind its benchmark, and has pretty much 17 dominated our return history for the early -- 18 early period of the asset class. 19 Liberty Partners was added in 1992. We're 20 the sole investor, and that's our core 21 relationship that we have in the portfolio. 22 Again, an investment management relationship. 23 Centre Partners, Cypress Equity, and 24 Carlyle Partners were added in '96. Still we 25 did not have partnership authority at that ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 86 March 29, 2001 1 point. 2 But in '97, and on as I guess we would 3 consider at the modern era of the -- of the 4 asset class, we received the legislative 5 authority to enter into partnerships, and we 6 have made most of our investments since 1997 as 7 a result in the asset class. 8 Page 8 really just lays out the structure 9 of the portfolio. We kind of view it as a 10 three-legged stool. Liberty Partners is 11 1.2 billion of that, with preferred economics, 12 very good split for the limited partner. 13 Co-invest program, again great economics. 14 They invest side-by-side with other 15 partnerships and deals. 16 And the core portfolios, 1.75 billion of 17 the commitments are in the world class 18 partnerships that we're part of in the LBO 19 arena. 20 Current portfolio, page 9, shows 21 3.7 billion dollars committed, 2.9 billion of 22 that is invested -- and these are as of 23 December 31st of 2000. 24 We've received back 1.1 billion in 25 distributions. And our remaining market value ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 87 March 29, 2001 1 is 3.6 billion. 2 Again you -- you know what that is, as a 3 percentage of the fund as a whole, right around 4 3.7. 5 Since October of '99, the FRS, excluding 6 alternatives, has had about a 5.4 percent 7 annualized rate of return over that same time 8 period. Alternatives, 23.5 percent annualized. 9 So we're -- our share of the overall 10 pension fund has been rising during -- 11 GOVERNOR BUSH: Twenty-three percent 12 return? 13 MR. JAMES: Annualized, yes. 14 GOVERNOR BUSH: How does that relate to 15 other -- to the big dogs that are on page, 16 whatever it was, 2 -- 3 or 4? 17 MR. JAMES: I haven't done a direct 18 comparison, but I would imagine, given our 19 partnerships, that we're involved in, they're 20 very, very normal for the large pension funds. 21 So we're probably right in the arena. 22 It's a relatively young portfolio. Over 23 two-thirds of the commitments have been made in 24 the last three years. 25 We laid out on page 10 the progression of ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 88 March 29, 2001 1 the portfolio. Just needless to say, we've 2 established all of the steps we had in mind 3 through creation of the separate asset class. 4 The next steps involve diversifying the 5 portfolio. Of course, with defined 6 contribution coming, we've had to modify our 7 view as to where we would be down the line, and 8 we're trying to accommodate that as time goes 9 on, and still have a world class portfolio. 10 Performance again, you have to remember 11 that half of the portfolio companies are still 12 valued at cost. The average age is 3.5 years. 13 So we generally have to look below the 14 performance numbers to look at the health of 15 the portfolio companies. We're very, very 16 happy with the portfolios -- where the 17 portfolio stands at this point in time. 18 And finally, on page 12, we wanted to 19 indicate how we've impacted the FRS's rate of 20 return. If you look on the excess return 21 column, this is what you do over or under your 22 target. The last 12 months, our asset class 23 has exceeded the benchmark by 8.87 percent. 24 Three -- over the three-year period by 25 2.6 percent annualized. And we've fallen ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 89 March 29, 2001 1 behind the benchmark over a five-year period by 2 2.85 percent. 3 And there's a summary at the end that 4 basically covers all the topics. And I'd be 5 happy to entertain any questions you've got. 6 Thank you very much for your time. 7 GOVERNOR BUSH: Thank you. 8 Any questions? 9 COMPTROLLER MILLIGAN: No. That was good. 10 MR. HERNDON: Thank you. 11 The item that's before you is a 12 recommendation to increase the overall 13 allocation, the range up to 6 percent, and to 14 modify our midpoint target for assets, 15 Governor, from the two-and-a-half percent that 16 you were alluding to earlier, to 4. 17 And that is largely a recognition of what 18 has happened in the public markets, as they've 19 fallen. And as private equity valuations have 20 enhanced, we have simply been a victim of -- of 21 our own prosperity to a degree, and the 22 unfortunate lack of prosperity on the public 23 side. 24 We don't anticipate putting new money to 25 work here. As you may know, we've had an ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 90 March 29, 2001 1 informal moratorium at the staff level for over 2 a year in private equity where we've 3 essentially said no new investments. We are 4 continuing to reinvest in our current 5 portfolios and our current managers where it's 6 appropriate from an investment point of view. 7 And we would intend to continue that same 8 philosophy, but no plans for new investments 9 beyond that until the DC situation is 10 clarified. 11 GOVERNOR BUSH: Okay. 12 All right. 13 COMPTROLLER MILLIGAN: I'll move Item 2 to 14 approve the expanded policy range and target. 15 TREASURER GALLAGHER: Second. 16 GOVERNOR BUSH: There's a motion and a 17 second. 18 Without objection, it is approved. 19 MR. HERNDON: Again, we'd -- recommending 20 deferring Item 3. It is a related topic, but 21 we'll come back to that in a couple of weeks 22 with your -- with your permission. 23 Item 4 is -- 24 GOVERNOR BUSH: But we -- 25 MR. HERNDON: -- a significant -- ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 91 March 29, 2001 1 GOVERNOR BUSH: -- haven't moved it. 2 MR. HERNDON: I'm -- 3 GOVERNOR BUSH: Is there a motion? 4 COMPTROLLER MILLIGAN: Motion, deferral. 5 TREASURER GALLAGHER: Second. 6 GOVERNOR BUSH: Moved and seconded. 7 Without objection, it's deferred. 8 I would -- I would just state that I 9 thought the summary here, at least in my 10 package about the Investment Advisory 11 Committee's recommendation, expresses my views 12 on this subject remarkably well. 13 MR. HERNDON: Good. 14 GOVERNOR BUSH: I don't know if you all 15 have the same -- 16 COMPTROLLER MILLIGAN: Yes. 17 TREASURER GALLAGHER: We do. 18 GOVERNOR BUSH: I'm glad that they're -- 19 TREASURER GALLAGHER: Fully agree with 20 that. 21 GOVERNOR BUSH: Glad that they're worried 22 about our personal liability. 23 MR. HERNDON: They are, indeed. 24 GOVERNOR BUSH: That's very good. 25 MR. HERNDON: Item Number 4 is a ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 92 March 29, 2001 1 significant milestone in the implementation of 2 the defined contribution program. Here we are 3 bringing before you a recommendation from our 4 internal selection team, and as well, a joint 5 meeting of the Investment Advisory Council, and 6 the Public Employee Optional Retirement Program 7 Advisory Council, to enter into contract 8 negotiations with an education advice vendor 9 for the defined contribution program. 10 The two firms that are contemplated here 11 are Financial Engines, and Ernst & Young. 12 Dr. Francis is here as Chairman of that 13 committee to give you a brief orientation as to 14 how we got to where we are. 15 And then we have representatives from both 16 firms here who would also like a minute or two 17 to address the Trustees as to how they see this 18 project unfolding. 19 So -- 20 GOVERNOR BUSH: An SBA meeting without that 21 would be like a day without sunshine, Tom. 22 DR. FRANCIS: Good morning. It's still 23 morning. 24 GOVERNOR BUSH: Good morning. 25 DR. FRANCIS: Governor, Trustees. ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 93 March 29, 2001 1 I do want to be mindful of your time. I -- 2 I do have a few introductory remarks, as Tom 3 said. But just nod, and I'll quickly cut to 4 the chase. 5 The -- 6 TREASURER GALLAGHER: That's a good thing. 7 DR. FRANCIS: This -- this process began 8 last summer. There was a substantial effort, a 9 great deal of investigation of valuation, the 10 most recent event in the process was that the 11 IAC and PEORPAC endorsed the recommendations 12 that we're bringing to you today. That 13 happened on March 16th. 14 The group that developed the recommendation 15 included a number of persons from outside the 16 SBA, including representatives from two Trustee 17 offices, from the school boards, from the 18 counties, from the Board of Regents, and from 19 the Division of Retirement. 20 Two lengthy RFIs were issued in the course 21 of this process. Twenty-one respondents -- 22 there was a strong response rate -- initially 23 came in. 24 That was eventually pared down to three 25 lists of well-qualified finalists, and finally ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 94 March 29, 2001 1 now to this pair of companies which we believe 2 are top rate in the field, and at the same 3 time, we believe are rather cost-effective. 4 As we all know, individuals must take 5 responsibility for themselves and their 6 retirement future. And that's irrespective of 7 whether they choose DC or DB. 8 Because as generous as our DB plan is for a 9 full 30-year term of service, relative to many 10 DB plans, it still replaces only about 11 50 percent of a person's preretirement income. 12 So if a person doesn't take charge, 13 irrespective of which way they go, and 14 effectively manage for their retirement future, 15 they're going to experience financial 16 discomfort. 17 The current law which we've said many times 18 is model legislation in many, many respects, 19 implicitly recognizes this in that the pro-- in 20 that the education program is for all FRS 21 participants, irrespective of whether they 22 choose DB or DC. 23 The law requires an ongoing education and 24 communications component to help members 25 prepare for retirement. It requires ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 95 March 29, 2001 1 coordinated information with other tax deferred 2 savings and investment vehicles available to 3 participants, and so forth. 4 So this program will give participants, in 5 our belief, the essential support they need to 6 successfully plan, to save, and invest for 7 retirement. 8 How this will happen is through a 9 combination of education, counseling, guidance, 10 and advice. 11 Those -- those services will address four 12 key topics for participants. First DB/DC plan 13 fundamentals. People have to understand the 14 basics of the plan really to get past go. 15 Secondly, how to best choose between DB and 16 DC. And this -- this is an important issue. 17 It occurs not only in the obvious transition 18 period, but on an ongoing basis, because our 19 current law has a very valuable second election 20 option for employees that can be -- can be 21 exercised at -- once at any point in the future 22 on behalf of all participants. 23 Thirdly, it will help participants to 24 effectively invest for the long-term. 25 And, finally, participants will be guided ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 96 March 29, 2001 1 on how to assess their retirement income needs 2 and stay on track to meet those needs. 3 All of this, as I said, will be addressed 4 comprehensively in the context of a person's 5 total resources. 6 Finally, just looking forward, another 7 element we foresee bringing into this program 8 in the future is guidance on how to effectively 9 manage assets and income during retirement 10 years. 11 Because in many ways, the challenge gets 12 more complex then. Tax considerations come 13 into place, annuitization considerations, the 14 degree to which you want to set off market and 15 mortality risks. And those things are all 16 immediate. And, as I say, in some ways more 17 complex, and we hope to incorporate that as 18 well. 19 Throughout this process, we have been very, 20 very sensitive to the obvious diversity of the 21 FRS participant base. We have designed the 22 program to comprehensively and fully meet the 23 needs of all participants from every stripe, 24 from every background, from every level of 25 education. ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 97 March 29, 2001 1 To just hit some of the high points, there 2 will be web-based information and software 3 tools available for persons who tend to be 4 self-sufficient and comfortable in that medium, 5 there will be toll free telephone support for 6 people who value the comfort of personal 7 attention and guidance from a human being, 8 there will be workshops on a continuing basis 9 on a wide variety of investment and retirement 10 planning topics. 11 During the three-stage transition period, 12 workshops will cover the entire state, and, 13 of course, will focus on this critical choice 14 between the two plans. 15 Also for a fee to members, we will 16 periodically make available one-on-one 17 counseling. I should note at the same time 18 that that counseling is available at any time 19 by phone without a -- a direct charge to 20 participants. 21 There will be personalized benefit 22 comparis-- comparison statements for all 23 600,000 FRS members during the transition; 24 there will be support, as I said, of the highly 25 valuable second election option on an ongoing ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 98 March 29, 2001 1 basis, there will be a wide array of printed 2 information, educational videos, a quarterly 3 newsletter, investor alerts, and so forth. 4 And, finally, these investors will work in 5 conjunction with a media firm, which the 6 decision -- the recommendation to you will be 7 finalized August 9th, whose principle 8 responsibility is to generate awareness and 9 appreciation for the significance of this 10 choice so that people, you know, actively 11 participate during the outreach -- the outreach 12 period. 13 And, finally, I think it's important to 14 mention what these two organizations will not 15 be doing. 16 These organizations will not be tilting 17 participants toward any particular set of 18 investment options, because they don't provide 19 any investment options. 20 There will be no misalignment whatsoever 21 between the economic interests of these 22 organizations, and the economic interests of 23 participants. 24 They will have a full fiduciary obligation 25 to participants, and they will carry the ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 99 March 29, 2001 1 liability of any breach of that duty should it 2 occur. 3 And they won't be using the access that 4 this program gives them to FRS participants to 5 cross-sell, to market insurance products, or 6 any other thing of that nature, again, because 7 they do not provide them. 8 Finally, a quick mention of cost. 9 Compared to the other two finalist groups, 10 the other groups were 50 percent higher than 11 this group in their initial bids. And we have 12 since made further progress on -- on what we're 13 looking at in terms of prices. 14 In our judgment, and while we expect to 15 make additional progress on that score, in our 16 judgment, we will be able to deliver a highly 17 cost-effective service to participants without 18 sacrificing any quality, and give them 19 everything they need to take effective control 20 of their financial future. 21 The deliverables that I mentioned, and that 22 we've been able to sort of prenegotiate to this 23 point, reflect best practices in the 401(k) 24 corporate market. And the costs that we have 25 been able to prenegotiate compare favorably ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 100 March 29, 2001 1 with those corporate plans. 2 So at this time, we recommend that you 3 grant us authority to negotiate contracts with 4 Financial Engines, who will serve as what we're 5 calling the Education Content Specialist. 6 Their responsibilities will be the text or 7 content of all the education materials; to 8 provide tools, software tools to participants; 9 and to support all the analytics that will go 10 on behind the scenes. 11 And, secondly, Ernst & Young -- 12 excuse me -- who would be the Participant 13 Communication Specialist whose job is the phone 14 support, the workshops, the counseling, all the 15 direct contact with participants. 16 As Tom mentioned -- 17 GOVERNOR BUSH: Question. Go ahead. 18 DR. FRANCIS: I'm sorry. I -- I can answer 19 questions now, or after we have remarks from 20 the two companies, whatever you prefer. 21 GOVERNOR BUSH: Oh, that's right. I forgot 22 we have our -- 23 DR. FRANCIS: Okay. Yes. We have 24 representatives of both firms. 25 We have Mr. Jeff Maggioncalda first, who is ACCURATE STENOTYPE REPORTERS, INC.

STATE BOARD OF ADMINISTRATION 101 March 29, 2001 1 CEO of Financial Engines. 2 GOVERNOR BUSH: Welcome, sir. 3 MR. MAGGIONCALDA: Thank you. 4 Governor Bush, Comptroller Milligan, and 5 Treasurer Gallagher, on behalf of 6 Financial Engines and our partners at 7 Ernst & Young, we are honored to be recommended 8 to serve as the education and advice vendor for 9 the State of Florida. 10 Financial Engines was founded by 11 Nobel Laureate, Bill Sharpe, who's done an 12 awful lot with the defined benefit pension 13 plans in California, and some larger 14 corporations. 15 We're a registered investment advisor, and 16 have been providing our services to help 17 individuals invest in their 401(k) plans for 18 quite some time. 19 Today about 50 million American employees 20 are investing about 2 trillion dollars in 21 401(k) plans, and other defined contribution 22 plans. 23 TREASURER GALLAGHER: A lot of money. 24 MR. MAGGIONCALDA: And Financial Engines 25 has been selected by hundreds of companies to ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 102 March 29, 2001 1 help over half a million individuals invest 2 these defined contribution assets. 3 Soon 600,000, approximately, State 4 employees will be facing a choice whether to 5 participate in defined contribution plan or 6 not. 7 I think this is a -- a wonderful 8 opportunity for the State employees to take 9 control of the way that they want to invest 10 their money. And these important decisions 11 will impact the way they live the last third of 12 their lives in retirement. 13 It is a privilege for our firm to be given 14 the opportunity to help them make this -- 15 this -- these decisions wisely. And I 16 personally commit, on behalf of myself and the 17 company, that we'll do everything possible to 18 make sure that the introduction of this new 19 DC plan is a success. 20 Thank you. 21 GOVERNOR BUSH: Thank you. 22 Where are you located? 23 MR. MAGGIONCALDA: We are in Palo Alto, 24 California. 25 GOVERNOR BUSH: Would you open up an office ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 103 March 29, 2001 1 here, or would this just be done over the 2 transom? How's that -- how's that going to 3 work? 4 MR. MAGGIONCALDA: We -- we -- we virtually 5 opened up an office over the last few months 6 here. 7 We will be happy to staff as many people as 8 required. 9 I think mostly in the earlier stages, we 10 need to make sure that we really understand the 11 needs of the various groups of -- of 12 participants thought the state. 13 And we do have sales offices in Atlanta, we 14 have sales and support offices in Boston. And 15 if the program so requires, we'd be happy to 16 staff whatever resources are required to -- 17 GOVERNOR BUSH: Let's put it this way: 18 If -- if y'all are the -- if -- you have a half 19 a million people that you -- that you -- 20 MR. MAGGIONCALDA: In -- in corp-- in 21 corporate plans, we've rolled out -- we have 22 over the last -- 23 GOVERNOR BUSH: Our -- and how big is 24 our -- our -- our account? 25 MR. MAGGIONCALDA: Approximately 600,000. ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 104 March 29, 2001 1 Over the past year, we have -- 2 GOVERNOR BUSH: You got your sales office 3 in a state where you just doubled your number 4 of people you're going to be providing 5 financial support for, if you get this, right? 6 MR. MAGGIONCALDA: Right. 7 Over the past year, we've had a 8 relationship with -- 9 GOVERNOR BUSH: It's my last chance to do 10 this, so I'm going to -- 11 TREASURER GALLAGHER: You're -- you're 12 still negotiat-- 13 You're still negotiating with them, aren't 14 you, Tom? 15 MR. HERNDON: Yes. 16 TREASURER GALLAGHER: I'm sure you have 17 your structures. 18 MR. MAGGIONCALDA: We've had -- we've had 19 experience over the last year working with AOL. 20 We've actually provided our services to over 21 4 million unique individuals through the 22 services that we provide on-line, and totally 23 confident we'll make sure we have the capacity 24 to -- to make this program a success. 25 GOVERNOR BUSH: Is Ernst & Young the -- the ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 105 March 29, 2001 1 part -- the part of the partnership that has 2 the direct contact with the -- 3 MR. MAGGIONCALDA: Yes. Basically we're 4 going to be doing the -- the content. Really 5 the -- the -- the modeling, analytics, and the 6 presentation of the risk return trade off, and 7 the forecasting of how much you might have, 8 virtually all the human touch component, phone 9 and -- and worksite, will be taken care of by 10 the Ernst & Young force. 11 TREASURER GALLAGHER: That's the next 12 speaker. 13 GOVERNOR BUSH: Okay. I've just -- I've 14 got a few questions for them, too. 15 MR. MAGGIONCALDA: Great. 16 GOVERNOR BUSH: Thank you. 17 MR. MAGGIONCALDA: Thanks. 18 GOVERNOR BUSH: Thanks for coming. 19 MR. MAGGIONCALDA: Sure. 20 My -- my pleasure. 21 DR. FRANCIS: Next up, we have Mr. 22 Bill Arnone, who is the National Practice 23 Director for Ernst & Young's employee education 24 efforts. 25 MR. ARNONE: How do you do? ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 106 March 29, 2001 1 On behalf of Ernst & Young, and my fellow 2 partner, Bart Francis, who runs our Florida 3 operations, I want to express our tremendous 4 excitement on what Jim mentioned was model 5 legislation creating this program. And we want 6 to make sure this program is a model program. 7 Six hundred thousand people have financial 8 futures at stake here, not just as Dr. Francis 9 said in making the right decision, but to use 10 this as a trigger to help them get motivated 11 and confident that they can take control about 12 their financial futures. 13 And we think, combining our high touch 14 approach with Financial Engines' high tech 15 approach, we'll be able to encourage and 16 motivate people to do what's best for their 17 futures. 18 And we would hope when they're more 19 confident about their financial future, there's 20 a spillover benefit to help them be more 21 productive focused State employees. 22 So we're tremendously excited about this 23 opportunity. We're eager to get started, and 24 hope at the end of the day, you'll say the 25 program was a success in the eyes of your ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 107 March 29, 2001 1 employees, your over 800 employers, and you as 2 Trustees. 3 Thank you. 4 GOVERNOR BUSH: Any questions? 5 How -- how are y'all handling the multi-- 6 the wonderfully diverse cultural group of 7 600,000 people? 8 One of the -- earlier in the presentation, 9 Colonel Higgins was talking about veterans 10 homes assuring that -- that CNAs are speaking 11 English. 12 The reverse possibly is true in -- in my 13 hometown at least, as it relates to State 14 workers, and -- are we -- are we prepared to 15 deal with the multicultural nature of -- 16 MR. ARNONE: Yes, sir. We have -- 17 GOVERNOR BUSH: -- the state? 18 MR. ARNONE: -- been -- first of all, we've 19 been very sensitized to that issue in the 20 course of our meetings with key players over 21 the past year. 22 We've committed to a diverse group of 23 workshop leaders that reflect the backgrounds 24 of the individuals, as we have done in private 25 sector programs as well. ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 108 March 29, 2001 1 We pride ourselves on -- pride ourselves on 2 connecting with people. So multilingual 3 workshops were needed; telephone counselors, we 4 have enough who can handle Spanish calls; and 5 we have translation services for other 6 languages, should those be required as well. 7 GOVERNOR BUSH: Where -- where would you -- 8 where would be your call center? I assume 9 there's going to be a centralized location -- 10 MR. ARNONE: Yes. We -- yes. We have a 11 national financial planning call center in 12 New Jersey. It's where we have our staffing. 13 And it'll be operated hours that are 14 convenient for everybody here in Florida. 15 Our workshop teams, we will clearly do 16 whatever we can to make sure people on those 17 teams are people who can relate very clearly to 18 Floridians, and using as many of our 19 Florida-based counselors as -- 20 GOVERNOR BUSH: Yeah. Not everybody from 21 Florida is -- used to be from New Jersey. 22 MR. ARNONE: I know. 23 TREASURER GALLAGHER: Not everybody speaks 24 New Jersey, do they? 25 GOVERNOR BUSH: How -- how -- ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 109 March 29, 2001 1 COMPTROLLER MILLIGAN: Now, wait a minute. 2 I'm from New Jersey. 3 TREASURER GALLAGHER: Well, there are 4 good -- 5 COMPTROLLER MILLIGAN: Be careful. 6 TREASURER GALLAGHER: There you are. At 7 most, a third of the people are from 8 New Jersey. 9 GOVERNOR BUSH: Exactly. 10 How -- tell -- in all seriousness, how 11 does -- how -- what -- how big is your scope of 12 business in this -- in this area, and -- and 13 how would we rank in terms of customers? 14 MR. ARNONE: Yeah. 15 We've been providing these types of 16 services since the late '70s. We now have 17 about 70 major clients, ranging from several 18 thousand employees, to one that is over 19 400,000. 20 Our total base of employees that we've 21 covered in the last couple of years is over 22 2 million people who need some type of 23 financial assistance with some type of 24 decision. 25 But let me not make any mistake about it. ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 110 March 29, 2001 1 You are the largest program of its kind in the 2 history of this country. 3 GOVERNOR BUSH: That's why I -- 4 MR. ARNONE: So -- 5 GOVERNOR BUSH: -- asked the question. I 6 was -- I was surmising that. 7 And is there a capacity issue here that -- 8 Maybe I should ask that to Tom. I mean, 9 are we -- in both cases where we are -- we're 10 the first major pension company -- pension plan 11 to go through this, are we prepared to deal 12 with the pretty dramatic increase in capacity 13 that would be necessary? 14 MR. ARNONE: Yes. 15 I can address it. We look very carefully, 16 even deciding to approach this opportunity, at 17 the impact it would have. 18 And we have had similar periods of time 19 with other clients together that met the 20 potential demand we would expect here. 21 We've looked at it very carefully, we've 22 provided backup data to the State Board of 23 Administration, and we have no doubt that we'll 24 be able to handle it in terms of call volume, 25 adhering to performance standards that SBA has ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 111 March 29, 2001 1 been very focused on. 2 And we've looked at the assumptions in the 3 workshops, and have no doubt that we would be 4 able to staff that, without even having to add 5 other people. We are going to add people to do 6 it. But we would not -- we would not have to 7 in order to meet the goals of the state of 8 Florida. 9 GOVERNOR BUSH: Any other -- 10 TREASURER GALLAGHER: The bottom line is 11 you're not going to put a call center in 12 Florida. 13 GOVERNOR BUSH: Didn't sound like that. 14 But -- we'd like to talk -- when I take off my 15 SBA hat, and get back to being the chief 16 economic development officer of the state, I'm 17 going to call you, because if we are the -- 18 others are looking at this. 19 And if we have, which we will have, shared 20 success, you're going to expand your business 21 because of our relationship, which we'll be 22 grateful for, but I hope that -- that that 23 would also be the possibility as you expand 24 capacity, that you consider hiring people here. 25 MR. BART FRANCIS: Governor Bush -- ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 112 March 29, 2001 1 GOVERNOR BUSH: Just say yes, and -- 2 MR. BART FRANCIS: -- Bart Francis, no 3 relationship to Dr. Francis. 4 I'm the Florida PFC partner, Personal 5 Financial Counseling partner. 6 When you want to make that call to 7 Ernst & Young, please make it to me. I would 8 love to have it over in Tampa, or some other 9 location, as you see appropriate. 10 GOVERNOR BUSH: Fantastic. 11 Thank you. 12 MR. BART FRANCIS: Thank you. 13 MR. HERNDON: We're very mindful of the 14 capacity concerns that you've expressed. 15 I mean, we -- we realize full well that we're 16 going to see a dramatic increase in call 17 volume, website hits, demand for speakers, 18 locations that are out of the way, and -- and 19 perhaps inconvenient. 20 And we've tried to address that in all 21 facets. This is a very multimedia focused kind 22 of enterprise, and we hope to have something 23 for everyone ultimately out there, not just the 24 employees, but the employers. 25 And, again, let's not forget, we've got 800 ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 113 March 29, 2001 1 of those ranging from the State of Florida to 2 Water Management District or mosquito control 3 district with three employees. And we've got 4 to hit all of those, too, because they've got 5 to process payrolls, and -- and what have you. 6 So it is a huge undertaking. We're very 7 confident that both of these firms have stepped 8 up. They've committed the resources that we 9 need to make this program a success. 10 We are not finished negotiating by any 11 stretch. We still plan to do that, and I know 12 that you all are very sensitive to the question 13 about costs and where we're headed with this 14 program. 15 We now have two of the major employer 16 funded cost elements in hand, if you will. 17 We've got a -- a third party administrator that 18 we've -- that we're negotiating with, and we've 19 got the educating vendor -- at least a major 20 element of the education vendor in hand. 21 And it's our expectation that with -- we 22 haven't finalized contracts with either one of 23 these parties. But it's our expectation that 24 on the agenda in front of you next time, we 25 will have a discussion about the budget ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 114 March 29, 2001 1 implications and where we are, where we project 2 to be, based on these contract negotiations as 3 well. 4 I can tell you now that we are very 5 confident that we're very much on the mark as 6 far as the budget is concerned, and what the 7 Legislature authorized. And we'll have that, I 8 hope, fleshed out for you in much greater 9 detail. With your action here this morning, 10 we'll be able to move forward with -- with 11 these two plans, and get you some pretty good 12 information. 13 TREASURER GALLAGHER: Motion on 4. 14 COMPTROLLER MILLIGAN: Second. 15 GOVERNOR BUSH: Moved and seconded. 16 Without objection, it's approved. 17 Tom, just on another note as we go forward 18 with these contracts, there was advertising or 19 PR was mentioned. I would hope that there'd be 20 some consideration for diversity as it relates 21 to our -- our partners and vendors as well. 22 MR. HERNDON: Yes. 23 GOVERNOR BUSH: These are huge 24 opportunities. And it may not be that in 25 the -- in the first two major contracts we've ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 115 March 29, 2001 1 signed up, that it would be appropriate to have 2 minority vendors be the sole vendor in this 3 regard. 4 But I -- I do think that they can add 5 tremendous value and sensitivity and 6 understanding of our state and the people that 7 we're serving. So -- 8 MR. HERNDON: Yes, sir. 9 GOVERNOR BUSH: -- I'd hope that would be 10 taken into consideration at least. 11 MR. HERNDON: Yes, sir, it is. And, 12 in fact, I know that at least with respect to 13 the two initiatives that we've begun thus far, 14 they both -- in both cases, they're looking at 15 some subcontracting assistance and so forth. 16 It wasn't feasible that the lead contractor 17 would necessarily be a minority vendor, but 18 we're -- we're certainly pursuing other -- 19 other dimensions of that. 20 GOVERNOR BUSH: Thank you. 21 MR. HERNDON: Item Number -- 22 TREASURER GALLAGHER: Motion to defer 5. 23 MR. HERNDON: Item Number 5 was -- was 24 proposed to be -- 25 TREASURER GALLAGHER: Withdraw. Sorry. ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 116 March 29, 2001 1 MR. HERNDON: -- withdrawn. 2 TREASURER GALLAGHER: Move to withdraw 5. 3 MR. HERNDON: Item Number 6 is a status 4 report on the defined contribution 5 implementation. And we've -- we've talked 6 about that to some degree already this morning. 7 I would just add that we are moving forward 8 with the transition broker. In fact, we have a 9 recommendation from staff at this point on the 10 transition broker. 11 We hope to have a review by our 12 Advisory Councils in the next couple of weeks, 13 and bring that to you before the month of April 14 is out. 15 We've begun the investment provider program 16 with some of the unbundled RFIs that are out on 17 the street. 18 The bundled RFI went out Monday evening. 19 It was posted on the website at 5:30 on Monday 20 evening. And we're looking forward to some 21 further work in that regard. 22 I know that there's some concern about the 23 timing of that -- 24 TREASURER GALLAGHER: I -- I really would, 25 if I may, Tom, ask you to extend at least ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 117 March 29, 2001 1 another week for the people to return those -- 2 their RFIs, considering that it was out on the 3 street, people could ask -- only got a couple 4 days to ask questions. 5 My understanding is that they're supposed 6 to get the answers to those questions tomorrow? 7 MR. HERNDON: Correct. 8 TREASURER GALLAGHER: And then you're 9 expecting everybody to get their bids in on -- 10 on Monday. 11 I don't -- I don't think that's -- I think 12 that to encourage people to be creative in how 13 they're going to take care of -- and -- and 14 offer their -- their services to us, I think 15 they're going to need a week of regular 16 daytime, instead of just weekend. 17 And some of the answers to the questions 18 could affect how their bid's done. 19 So would you commit -- 20 MR. HERNDON: Yes. 21 TREASURER GALLAGHER: -- to us to do it -- 22 to give them another week? 23 MR. HERNDON: No. That's fine. We'll be 24 glad to do that. 25 We'll -- we'll make those arrangements and ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 118 March 29, 2001 1 make that announcement on the website so that 2 all the parties will be aware of that. 3 Governor, I'd -- other than accepting the 4 report, I don't think there's any action on -- 5 on Item Number 6. 6 GOVERNOR BUSH: All right. 7 MR. HERNDON: On Item Number 7 is the 8 monthly fund activity analysis for the month of 9 January. 10 And I believe you've just been given the 11 summary of the report that it would be coming 12 to you in the next few days for the month of 13 February. 14 The -- the critical element here, and I 15 want to just give you this perspective is 16 market value, see the total for the FRS, at 17 98 billion dollars; the Chiles Endowment; and 18 then the other funds, 126 billion dollars in 19 total. 20 If you turn the page though, I think this 21 is an important dimension to -- to focus on. I 22 don't want to lose sight of the market value. 23 But this gives you a perspective on the FRS 24 for three measurement periods: Five years 25 ending February 28th, the end of -- the end of ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 119 March 29, 2001 1 last month; 12 months, ending February 28th; 2 and the last eight months, or essentially the 3 fiscal year that we're currently in. 4 And so you'll see, for example, on the line 5 labeled total FRS, the column identified as 6 managed, that is our performance. That is what 7 we have accomplished during that five-year 8 period, or twelve-month period, or eight-month 9 period. 10 And then the target is the benchmark target 11 that you approve for us, and is incorporated in 12 our total fund investment plan. 13 So you'll see, for example, under the 14 column labeled value-added for the total FRS, 15 we're 20 basis points ahead of our target. 16 For value-added for the 12 months, we're 17 1.8 percent ahead of our target. 18 And for the eight-month period on a 19 value-added basis, we're 1 percent ahead of our 20 target. 21 Now, that's very relative performance. 22 We -- we're delighted that we're there. But in 23 absolute terms, as you are very well aware, the 24 market has dramatically fallen in the last 9 to 25 12 months, and you see that perhaps most ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 120 March 29, 2001 1 vividly in the columns labeled twelve-month and 2 eight-month. You see the managed in the 3 targets at seven-and-a-half and 4 eight-and-a-half percent down for the total 5 FRS. 6 And down below, we've given you some of the 7 additional indices, the S&P 500 for 12 months, 8 down 9 percent; for the last eight months, down 9 14.6. And the NASDAQ, of course, is the horror 10 story of the year, down 52.8 percent for the 11 last 12 months, and so on. 12 There's no question that we are subject to 13 the vicissitudes of the market, with 65 percent 14 equity exposure between U.S. and international. 15 And both U.S. and international equity markets 16 have been hammered here in the last year. 17 We are also suffering from those same 18 results. But we are pleased at least that our 19 performance has been less painful than the 20 markets as a whole. 21 And that completes my report. I'd be happy 22 to answer any questions that you might have. 23 TREASURER GALLAGHER: Move we rise. 24 MR. HERNDON: Thank you. 25 GOVERNOR BUSH: Thank you very much, Tom. ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF ADMINISTRATION 121 March 29, 2001 1 (The State Board of Administration Agenda 2 was concluded.) 3 * * * 4 (The Cabinet meeting was concluded at 5 12:12 p.m.) 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ACCURATE STENOTYPE REPORTERS, INC.
122 March 29, 2001 1 CERTIFICATE OF REPORTER 2 3 4 5 STATE OF FLORIDA: 6 COUNTY OF LEON: 7 I, LAURIE L. GILBERT COX, do hereby certify 8 that the foregoing proceedings were taken before me 9 at the time and place therein designated; that my 10 shorthand notes were thereafter translated; and the 11 foregoing pages numbered 1 through 121 are a true and 12 correct record of the aforesaid proceedings. 13 I FURTHER CERTIFY that I am not a relative, 14 employee, attorney or counsel of any of the parties, 15 nor relative or employee of such attorney or counsel, 16 or financially interested in the foregoing action. 17 DATED THIS 4TH day of APRIL, 2001. 18 19 20 21 22 23 LAURIE L. GILBERT COX, RPR, CCR, CRR, RMR 24 100 Salem Court Tallahassee, Florida 32301 25 850/878-2221 ACCURATE STENOTYPE REPORTERS, INC.