AAI Says Neb. Workers’ Comp Bill Would Hurt Policyholders

April 5, 2002

A bill that would transfer money from Nebraska’s Compensation Court Cash Fund to the general operating budget is part of a trend of bad public policy that will ultimately hurt policyholders, according to the Alliance of American Insurers.

If signed into law, LB 1310 would authorize the legislature to transfer funds from the state’s Compensation Court Cash Fund into the general fund to help balance the state’s budget.

“This action is only the latest in a disturbing series of events where states are raiding dedicated workers compensation funds to balance budgets,” said Keith Bateman, Alliance vice president and director of workers’ compensation and health for the Alliance, which is asking Gov. Mike Johanns (R) not to sign the bill into law.

The Minnesota Legislature recently enacted a similar bill over the veto of Gov. Jesse Ventura, while Maryland and New Jersey are contemplating the issue.

In describing the situations that lead states to take such action, Bateman explained: “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. However, the moneys 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. Eventually the shortfalls will have to be made up, usually 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,” Bateman commented.

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