News Briefs

November 20, 2005


Governor’s Measures Defeated in Special Election

California’s special election battle, the costliest campaign in the state’s history, roared to a close in November, much to the chagrin of Gov. Arnold Schwarzenegger.

Eight statewide measures that were on the ballot failed to win voter support. In particular, four measures heavily promoted by Schwarzenegger as part of his “year of reform” agenda were defeated.

The initiatives-Propositions 74, 76 and 77-would have made it more difficult for teachers to obtain job tenure, would have changed the budget system to give the governor more say over spending and would have given a panel of retired judges the right to decide state political boundaries, a job now done by lawmakers. Proposition 75, would have required public employee unions to obtain annual permission from members before using their dues for political purposes.

Meanwhile, voters also rejected Propositions 78 and 79-that both would have created discount prescription drug plans for eligible low- and moderate-income residents through state-negotiated rebates with drug manufacturers.

Proposition 78, which had a slightly lower threshold for eligibility, would have relied more on voluntary participation by drugmakers and could be terminated under specified conditions.

Proposition 79, which required federal approval, would have prohibited state Medicaid contracts with manufacturers that do not provide the best price under that program, except for drugs without therapeutic equivalent. The measure would have outlawed “profiteering.”

The ballot packages, Schwarzenegger said, were needed to shake up an ossified political establishment in Sacramento. Yet Schwarzenegger faced criticism about the cost and need for the election. When all the election bills are totaled, campaign spending this year will top $250 million-the most expensive initiative campaign in California history.

Forces opposed to Schwarzenegger, led by organized labor, spent more than $100 million to beat him at the polls. The governor spent more than $50 million on behalf of his measures, including more than $7 million from his own pocket.

The two other initiatives on the special election ballot, Propositions 73 and 80, dealt with abortion and electricity regulation, and drew considerably less notice.

Information for this article was compiled by, a Pew Research Center project.


UA Research: Risk of Flooding in Arizona Not As Severe as Estimated

Up to 29,000 Arizonans paid for insurance under the National Flood Insurance Program in fiscal year 2004, but new research shows that many may not need the costly coverage.

A study headed by a University of Arizona associate professor suggested the risk of flooding in Arizona is not as severe as projected by the estimates provided by the Federal Emergency Management Agency.

Currently, the National Flood Insurance Program requires all residents to buy flood insurance in land declared a high flood zone.

But according to the UA research, only 5 percent of the damage predicted by the FEMA agency is likely.

“Current flood-plain maps have a financial impact on Arizona for sure, because people and communities are paying for flood insurance they won’t realistically use.” said Jon Pelletier, a UA associate professor.

Pelletier said Arizonans who don’t need the federal flood insurance are subsidizing other parts of the country and are paying for reconstruction costs in areas that are really flood-prone, like the Mississippi flood plain.

For large-scale developments there are already engineering and updated risk-assessment methods in place that are pretty accurate. But for owners of older homes and for new homes that are not part of a larger development, updated flood information is extremely important, said Philip Pearthree, a geologist for the Arizona Geological Survey.

Updating outdated flood-plain information can take FEMA years.

Real estate officials said flood-plain mapping should be revised to reflect up-to-date, more accurate scientific data, which could potentially save homeowners hundreds of dollars a year.

Pelletier’s team, which included Pearthree, studied the foothills of the Harquahala Piedmont west of Phoenix and the Tortolita Piedmont northwest of Tucson using remote sensing, geological mapping and a numerical computer model.

Copyright 2005 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


Insurance Expert: Montana Workers’ Compensation Fund Needs $14 Million

Montana’s state-run insurance program for workers injured on the job before July 1990 needs a $14 million infusion or it could run out of money in 10 years, leaving the state responsible for up to twice as much in claims, an insurance expert told the board of the Montana State Fund.

The so-called Old Fund is a pool of money set aside to pay the medical costs and lost wages for Montanans injured on the job before July 1990. The money was raised with a special tax on all businesses and wage earners to help the state workers’ comp program out of a $500 million shortfall.

However, in 2003 the Legislature siphoned the Old Fund’s $22 million in reserves to balance the state budget. At the time, Old Fund managers believed they had enough money to remain solvent, but its investments didn’t earn as much as expected.

“That’s the value of having contingency funds,” said Laurence Hubbard, president of the Montana State Fund. “It’s often decades before our expenses are known.”

If lawmakers fail to set aside $14.2 million, the state treasury will have to pay an estimated $27.4 million between 2015 and 2045 when the Old Fund expires.

The Montana State Fund, a semiprivate state-owned agency created in 1990, manages the Old Fund, but the Legislature is responsible for the account and any shortfalls at the agency will come out of state tax coffers.

Senate Finance Committee Chairman Mike Cooney, D-Helena, said the Legislature needs to address the shortfall-especially because it was the Legislature that spent the Old Fund’s reserves.

“I would suspect we have the obligation to come in and make it right somehow,” Cooney said.

He said it’s possible that a fix could come as early as December, when lawmakers are expected to meet in special session to rework the way Montana pays for public education and put more money in teachers’ and public employees’ retirement accounts.

Gov. Brian Schweitzer would have to expand the scope of the session to include the workers’ comp issue.

Copyright 2005 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Montana State Fund Employees to Get Payments for Meeting Goals

Montana State Fund employees will receive a one-time payment for helping the state’s workers’ compensation insurance company end the year on a profitable note.

For example, State Fund CEO Lanny Hubbard, already the highest-paid state employee, will receive a $41,000 payment in addition to his $179,000 annual salary.

Five company vice presidents get an average of $16,600, while the average payment for non-executive employees is $4,200.

The payments are the first to be awarded in three years and the first to reward all State Fund employees, not just management and exempt employees, for achieving and exceeding business goals set at the beginning of the fiscal year.

“This is the first time since everyone has been eligible we’ve had a good year,” spokesman Matthew Cohn said.

The State Fund established a gainsharing program in 1995 that initially awarded only executives additional payments for those years when the company met its financial goals. The program added exempt employees in 1999 and all employees in 2002.

This year, 12 percent of the roughly $1 million in the gainsharing pool is going to management, Cohn said. Last time, 34 percent went to executives.

The average payment comes to about 8.7 percent of an employee’s annual salary.

Copyright 2005 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Montana Auditor Adds Two Companies in Captive Insurance Market

Montana State Auditor John Morrison approved two new Montana companies that can provide insurance in the captive insurance market. The State Insurance Depart-ment has licensed MHA Worker’s Compen-sation Reciprocal Insurance Co. and Eadon-ton Insurance Co. as captive insurance companies in Montana. The new captives will insure the risks of a number of Montana hospitals and a California construction company.

According to the Auditor’s office, Montana is one of a number of states in the nation aggressively pursuing captive insurance business. A captive may be used to provide for some or all of its parent company’s insurance. Benefits of forming a captive include stabilizing insurance costs, providing greater access to reinsurance and tailoring coverage for special insurance needs.

The 2001 Legislature passed a law at Morrison’s request allowing captive insurance companies to operate in Montana. Currently, there are 12 captive insurance companies formed in the state to insure rural hospitals, nursing homes, fuel stations, commercial trucking firms, investment firms, medical professional firms, construction companies and attorneys. Additionally, three captive management companies and the Rocky Mountain Captive Insurance Association have formed in Montana. Morrison’s goal is to make Montana the leading captive domicile in the West.

Morrison requested additional legislation in the 2005 session further streamlining the captive insurance process in the state.

“The captive insurance industry is the type of business I have been working to encourage in Montana to help diversify our economic base,” Morrison said. “I am confident Montana’s infrastructure and laws will attract other businesses wishing to take advantage of this opportunity.”

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