What Does Bernie Madoff & the North Lake County Hospital District Have in Common

Answer: Neither the District Board or Madoff's Regulator, the SEC, exercised any oversight on how collected funds were spent.  Were the funds spent to benefit taxpayers or Madoff's clients - no oversight existed to ensure exactly how collected funds were spent.  My comments on this follow Marilyn Bainter's recent op ed article in Sunday's Lake section of the Orlando Sentinel.

Marilyn Bainter, a member of the North Lake (FL) Hospital District Board, submitted an Opinion Article to the Orlando Sentinel's Lake section and it was published yesterday, Sunday, Nov. 1 in the Lake Section "My Word" page (which was NOT published on their website).  However, Marilyn sent me the text of the article and it is below.  Read her editorial about problems with the Florida State regulations mandating the 1 mill tax ( it costs you $100 for every $100,000 in property valuation ) on all North Lake property owners, then my following comments.

Here is Marilyn's editorial:

MY WORD

By Marilyn Bainter

Independent hospital districts were created many years ago to fund health care for the poor and the needy.  Also, many years ago, non-profit status was awarded to hospitals that agreed to provide that care.  That meant hospitals could operate without paying federal, state or corporate taxes or ad valorem taxes on their property.  They can issue bonds that are tax deductible, getting them a better rate.  Contributions to the hospitals are tax deductible to the donor.

Our two local hospitals, Florida Hospital Waterman and Leesburg Regional Medical Center, Inc., subsidized  by the North Lake County Hospital District tax of 1 mill and by their non-profit status, doubled their tax collections in five years, showed increased profits on their financial statements, but continue to expect us to pay for their bad debt and short fall on Medicare and Medicaid; they want us to cover their contributions to the Cancer Society, the community college, charter schools and the hospital minister, as well as many other worthy organizations, all claimed as community benefits by them.

When the hospitals do not pay ad valorem taxes, federal taxes and state and sales taxes, we in the community must make up the difference.    It is not the other guy paying, but all of us.

As evidenced by the hospital’s public presentations, all of those that have health insurance pay more to make up for the short-fall in Medicare, Medicaid and the uninsured.

First and foremost, in my view the tax is unconstitutional.  There has never been a vote by the people to allow a taxing district, which is required by the constitution. 

There are 16 hospital districts in 12 counties.  The Lower Florida Keys and Madison County no longer tax.  How do the other 57 counties in the state handle charity care?  That is the question the Lake County Legislative Delegation is going to have to answer.

 The Delegation has to justify any position they take with facts and numbers and tell us why North Lake County is different.  They are the only over-sight on special districts and the only ones that can ask for help on the law.  The only other solution is for a citizen to file a law suit and let the courts decide.

 If the citizens feel they would like to contribute to their hospitals, that is their choice.  It is a tax deductible donation.  If they would like to continue the tax, do it the right way with a referendum, either for an ad valorem tax or a sales tax, but a hospital tax on property for charity is a very fine line of infringement on property rights.

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My comments:

Marilyn mostly focuses on questioning the justification for the Lake County tax when 57 other counties in Florida have no such tax to subsidize their hospitals.  It also seems that the law may have been implemented without following the Florida Constitution, since many of the affected taxpayers never got to vote on the tax (the County Commission did a back door deal years ago and apparently, according to Marilyn (in separate conversations), the North East Lake County property owners never voted on the tax.

My issues with the Tax are that the law has NO oversight or conditions for the payments, and no accounting controls or "audit trails" are required.  The Board does have an "audited" financial report that ensures the funds go to the hospitals, but once they get the funds, the Board only gets consolidated financial statements from the Hospitals that do not show exactly where the tax funds were spent.  Thus, each year, the ineffective current Hospital Board doesn't ask any questions (in public meetings), and votes to transfer about $12-million of taxpayer funds to the two hospitals without ANY guidelines for accountability, conditions on use, etc. because the law does not have any such requirements, AND the Board does not establish their own spending guidelines.    Would you give $100 of your money to someone who just said "I will spend it on indigent care or continued hospital services" without any requirements to know where it was spent?  I wouldn't.   As an experienced corporate internal auditor, I have to say this is a tax giveaway without any oversight required in the State legislation.

Thus, the County's State legislators have been informed of this weakness, but are waffling and not taking responsibility to even improve the accountability wording in the law.  Two of them, Marlene O'Toole, and Alan Hayes, received campaign contributions from Hospital supporters, and won't budge.  Additionally, State Senator Carey Baker deferred his support, saying the issue of Constituionality should be decided.  But, then when I called him, he had left the research up to Alan Hayes, who specifically said he was against any change in the Hospital District regulations.  I have been told that Hayes received two $500 donations from a Hospital Association just before initial discussions on the Hospital Tax started in September.  So, if we later find fraud or improper usage of the funds, those are the two legislators (plus Baker) who refused to improve accountability over how the funds are spent.  (Note:  At this time, I have no evidence of improper actions by the Hospitals.  Most of the Hospital staff I have met in hearings seem ethical and very committed to healthcare,  but the current law allows them to spend the funds on anything they want, including transfer of funds to build a hospital by the Villages and subsidize Sumter County residents who do not pay any similar tax, or they can use the funds for higher salaries, or unjustified expensive equipment demanded by a Doctor.  Neither the Board or the legislation have any requirements for an exact list of valid spending targets and reporting requirements, thus the Hospitals have been deciding on their own without any direction from elected officials).

The Board could mitigate some of the concerns if they devised written spending guidelines for the Hospitals that required an audit trail, specified the only areas for spending the funds, and required quarterly financial reports documenting the spending.  However,the current Board in my opinion doesn't want to do any work, and just wants to have a 15 minute meeting and give away $12-million in taxpayer funds without oversight because they "trust" the hospitals to do the right thing.  Ronald Reagan once said "Trust, but verify", which is clearly not the motto of this Hospital Board.

So, the law needs to be significantly revised to improve oversight and accountability for the funds, and then Marilyn's issues of whether there even should be a tax should be presented in a referendum for the voters to decide.  Why are taxpayers in North Lake County asked to subsidize hospitals and healthcare of others without accountability, conditions or oversight controls when hospitals in 57 other Florida counties have no such subsidy?

Remember, just this week, Ponzi scheme King, Bernie Madoff, said he was amazed at how the SEC never caught him at siphoning funds.   The SEC let taxpayers down on oversight protections, and the North Lake Hospital District Barod, and the Lake County, Florida Legislators delegation should not follow that path of ignoring the need for oversight.   Both the taxpayers and the Hospital staff (caught in the middle of this issue) deserve better regulations and direction from the Legislators and the Hospital District Board.

Vance Jochim