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Colorado firms decry state raids into worker funds

By Ed Sealover, Rocky Mountain News

Published February 9, 2009 at 12:05 a.m.

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Colorado business owners were within two months of paying off two long-taxing workers compensation funds in 2002 when the legislature raided them to balance the budget.

So, with the funds largely depleted, businesses began paying in and building them up again, getting to the point where they are likely within a year or two now of being fully funded, and hence, of ending the fee. But once again, the governor and legislators have proposed taking $118.7 million out of them over the next 18 months, leaving businesses to start their third go-round of payments that should have been done by now.

Both Democrats and Republicans say they understand the pain of businesses that pay as much as $50,000 per year to the Major Medical Insurance Fund and Subsequent Injury Fund, only to see the money diverted. If this were a simple question of ending payments that should have ended some six years ago, they would do it, they say.

But this is not a simple question.

The transfers out of the two accounts are part of a proposed $309 million that Gov. Bill Ritter wants to take from 22 designated funds to balance the recession-strained budget over the next 31/2 years.

$300 million in cuts

Not using this money would mean having to make roughly $300 million more in cuts to services like health care and human services.

Business leaders complained in 2002 when Republican Gov. Bill Owens first raided the funds but ultimately gritted their teeth and got back to refilling them.

This time, tired of feeling like funds for their injured workers are being used as slush funds at legislators' disposal, they are fighting back.

A coalition of the most influential business organizations in the state - including the Colorado Association of Commerce and Industry and the Denver Metro Chamber of Commerce - is supporting a bill to discontinue the tax. The state can raid their funds this time, but businesses have no desire to continue payments, industry leaders say.

"During these times, it's difficult. And frankly, we look at this as kind of a breach of trust on the part of the government," said John Berry, president of the Workers Compensation Coalition, a business association that deals with workers comp issues. "This fund was set up for injured workers, and now it's being hijacked for other purposes."

The two accounts, decades- old funds set up to deal with different problems, are:

* The Subsequent Injury Fund, which was established to help employers who hired someone who had suffered a partial disability on a past job and then became permanently disabled because of a new injury.

* The Major Medical Insurance Fund, which provides unlimited benefits to industrially injured workers.

Though both funds continue to pay out to people covered under them, the state transferred responsibility for these types of injuries to other funds and closed entrance to both pools by 1994.

To pay for these, the state continues to tax businesses' workers compensation insurance premiums. Once the funds reach a level of actuarial balance - a time when the revenue in the funds will cover all future costs of benefit recipients - the tax ends.

That balance was close in 2002. Current actuarial estimates of the date of balance now range anywhere from late 2009 to early 2019, depending on interest rates and the inflation of medical costs, but Berry said most expect it to be realized in 2010 or 2011.

Sen. Mike Kopp, R-Littleton, has proposed a bill, expected to be heard by a Senate committee today, that would eliminate the workers compensation tax, saving an estimated $38 million that businesses could put to job creation. It's his second attempt to pass such a law - the first one failed in 2007 - but has gained much more attention and support from businesses because of the current push for job growth during the recession.

"I think the game here is whenever it nears actuarial soundness, it becomes the legislature's piggy bank," Kopp said of the two funds. "And I think there's an attitude among some that they don't want it to reach actuarial soundness because it would cost them their slush fund."

Legislators who work most closely with the state budget say the equation is more complicated than that.

No rainy day fund

Because the state does not have a rainy day fund reserve, it must find money wherever it can to continue offering essential services, said Rep. Mark Ferrandino, a member of the Joint Budget Committee.

Keeping the $119 million in the two workers compensation funds might calm businesses' complaints, but other budget cuts might be so deep that they jeopardize public safety, he said.

"I think they have a valid reason to raise those concerns," said Ferrandino, D-Denver. "But if you look at where we're trying to find money, where we're cutting, this budget-balancing pain is spread throughout the state. And due to the fact that we don't have a rainy day fund right now, that's what we have to do."

Comments

  • February 10, 2009

    3:15 p.m.

    Suggest removal

    CarefulReader writes:

    I challenge those who are opposed to "raiding" these funds to come up with an alternative way of cutting $300 million from the budget.

    The state is very limited as to what it can cut considering 94% of the budget is mandated through the state constitution and TABOR prevents tax increases or budget deficits.

    These funds are the best way to make up for the shortfall while having the smallest effect on people's lives.