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Health of state fund questioned

HELENA (AP) - Officials overseeing the state workers' compensation program responsible for paying the oldest claims for on-the-job injuries say it may be headed for serious financial trouble.

Officials running the ''old fund,'' as it is known, said it could run out of money because the Legislature took away $22 million to balance the state budget.

Others disputed that claim.

Laurence Hubbard, president and chief executive officer for the Montana State Fund, acknowledged today the concerns he has for the financial health of the fund are no different than those expressed to lawmakers nine months ago, as they debated a bill removing the money to help balance the state budget.

''This is not about panic,'' he said. ''This is a concern we have.''

The Legislature's decision to withdraw the money has left the fund barely breaking even and that leaves little room for error, Hubbard said. Higher-than-expected medical costs for injured workers, less-than-expected investment earnings or unfavorable court rulings could tip the financial scales, he said.

''There is no question that the old fund is fully funded, but the excess only amounts to less than a million dollars,'' Hubbard said.

Legislative Auditor Scott Seacat said that situation is not surprising, since the goal of the 2003 Legislature in taking the money was to leave the old fund in a break-even condition.

An audit by his office last year showed the fund has enough money to cover the cost of the pre-1990 claims over the expected life of those claims, even without the $22 million that was removed, he said.

House Majority Leader Roy Brown, a Billings Republican and sponsor of the bill that removed the fund's excess money, dismissed Hubbard's worries about the fund's financial health.

''I don't think it's serious,'' he said. ''There's 1,500 active claims and there is almost $100 million in there. Investments are doing better now. If we can't make 90-some million dollars grow to cover $120 million in claims over a 25-year period, then we'd have a pretty sorry investment strategy.''

The state workers' compensation program, plagued by a $500 million potential deficit after years of keeping rates artificially low, was split into two funds by the 1989 Legislature. That deficit in the old fund, responsible for injuries before mid-1990, was paid off with a temporary tax on employers and employees.

The new fund is responsible for covering the medical costs and other benefits to workers with post-1900 injuries.

Hubbard on Wednesday said agency executives had warned lawmakers that eliminating the old fund's reserves could lead to trouble. Nothing has changed, he said.

''We told them it was ill-advised to take any money,'' he said. ''It was not prudent to take that money.''

The financial condition is not dire for the fund, and could rebound with a rising stock market and stable health care costs, Hubbard said. Should the fund develop a deficit, that hole would have to be filled by the Legislature, he noted.

Hubbard said he is particularly concerned about pending court cases that could result in increased cost of benefits connected to older claims covered by the fund. The cases deal with whether limits on workers' compensation liability for injuries related to occupational disease are constitutional.

If the courts overturn those limits and rulings are retroactive, some of the oldest worker claims could become more costly, Hubbard said. However, he said, final resolution of those court cases could be as much as two years away.

Brown said the State Fund's worries are more political than financial. He said Hubbard is trying to discourage the next Legislature from coveting the new fund's reserves as well.

''The State Fund is concerned about huge reserves they have and they're playing a little defense here,'' he said. ''They don't want us messing with their reserves. This is bogus. There is plenty of money in the old fund.''

 

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