A billion-dollar shortfall in Arizona’s state economy has many lawmakers conjuring up solutions and desperately searching for ways to solve current and future deficits.
One solution that they came up with reportedly had the Arizona small business community in an uproar. The proposal by state legislators was to sell off the State Compensation Fund (SCF) to a private non-profit organization. The SCF is Arizona’s largest provider of workers’ compensation and volunteers as the insurer of last resort for any high-risk employees. Currently, the Fund insures approximately 60 percent of Arizona businesses and of that, 82 percent of their policyholders employ 10 or fewer employees.
The idea of privatizing SCF was reportedly very appealing to some fiscal conservatives because the sale would have brought in substantial cash and could have spurred competition. According to SCF, if it was to be sold it would have been expected that as many as 40,000 Arizona businesses would not be able to obtain mandatory workers’ comp insurance through the voluntary market. Those businesses would then not be able to secure workers’ comp through the private market and would be placed in the assigned risk pool, which would have a significant effect on the cost of their annual premiums.
SCF’s Jon Allen, vice president of Insurance Operations and Corporate Relations stated, “We put together a grass roots campaign and sent out a packet of information to all of our policyholders. We have more than 53,000 [policyholders that we informed] about the bills and proposals to sell SCF of Arizona. They responded with massive amounts of letters and faxes and e-mails to their legislators and we think for the large part due to that, they have backed off.”
Both sell-off proposal bills have been doused and there is a new bill on the horizon that will reportedly aid SCF in no longer having to undergo state legislation scrutiny. The new bill will protect SCF, and deem it the carrier of last resort in statute. Currently, SCF is the carrier of last resort by board resolution. The bill, HB 2195, is still being voted on in the House.
“Every five or six years, legislate scorers in Arizona try to make some kind of rate on State Fund assets,” Allen continued. “What we are trying to do is just basically once and for all put to rest the issue that State Fund assets are not owned by the state of Arizona, we are not an appropriated agency. All of our funds are premium income and investment income and not owned by the state of Arizona. We are just trying to resolve that.”
SCF is currently in negotiations with the state. According to Allen, “We are still in discussions right now with legislators and the Governor’s office on helping them in a fashion to balance their budget by using some of our funds.”
SCF would reportedly like to assist the state in their deficit by possibly purchasing state assets in the near future.
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