Comp Fund Raids A Trend?
By Daniel Hays
NU Online News Service, April 4, 4:24 p.m. EST?An insurance trade organization said it is tracking a negative trend that has cash-strapped states grabbing up money normally earmarked for their workers' compensation systems to use for budget balancing purposes.
The Alliance of American insurers said the latest example occurred in Nebraska, where the state's unicameral legislature yesterday sent Republican Gov. Mike Johann a bill to transfer $4 million from the state's Compensation Court Cash Fund. The money is used to pay the salaries of court personnel. Another $4 million will remain in the fund.
The Alliance, based in Downers Grove, Ill., said the measure has the sponsorship of the Johann Administration, so they expect the governor will sign it.
A spokeperson for the governor, Chris Peterson, said the governor would not act on the bill until Tuesday. He confirmed that Mr. Johanns had recommended the transfer approved in LB 1310.
The Nebraska action "is part of a trend of bad public policy that will ultimately hurt policyholders," the Alliance said.
Keith Bateman, Alliance vice president and director of workers' compensation and health, complained that the Nebraska move "is only the latest in a disturbing series of events where states are raiding dedicated workers compensation funds to balance budgets." His group is asking Mr. Johanns not to sign the bill into law.
Dave Anderson, vice president and assistant director of workers' compensation for the Alliance, said that in Minnesota the state legislature "raided" $94.9 million from the assigned risk residual market fund that covers employers who can't get insurance elsewhere.
In addition, he said, they had taken $282 million from the second injury fund that covers insurers and self-insureds. The fund provides some of the cost of a claim when a previously injured employee is reinjured after returning to work.
Mr. Anderson said when there is a shortfall in that fund "the industry and employers are going to have to make it up all over again."
The measure was passed into law over Gov. Jesse Ventura's veto.
According to Mr. Bateman, "Maryland and New Jersey are contemplating their own money grabs."
"States facing budget shortfalls are casting around for other sources of revenue, and the cash built up in a dedicated workers' compensation fund is very tempting," Mr. Bateman said.
"However, the monies in these funds are not free for the taking. They exist to assure that the claims of injured workers are paid or that state workers compensation agencies have sufficient funds to oversee the payment of benefits. By robbing Peter to pay Paul, these states are cutting holes in the safety net of its injured workers or slowing the dispute resolution process," he added.
Mr. Bateman forecasted that the shortfalls will eventually have to be made up from additional assessments on insurers and employers. "Legislators shouldn't be surprised if we oppose the creation of such dedicated funds in the future, because the money was diverted from the intended purpose."
The Alliance represents 326 property-casualty insurance companies.
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