The Professional Insurance Agents of Oregon — PIA Oregon — is just one of many groups in Oregon disturbed over Governor Kate Brown’s decision to grab funds from the quasi-private State Accident Insurance Fund (SAIF) to beef up the PERS retirement system.
Brown’s decision takes $486 million from SAIF’s $1.9 billion surplus.
Negative reaction around the state was immediate. PIA Oregon Lobbyist Lana Butterfield said the governor’s decision is not a good one and she checked off a few reasons why:
• SAIF’s reserves are essential to protecting the safety of Oregon workers and ensuring low rates for employers throughout state.
• Small businesses, school districts, local governments and non-profits depend on SAIF’s affordable rates and safety programs to ensure a safe and healthy workplace.
• Raiding SAIF’s reserves will negatively impact worker safety and accident prevention.
• Any excess premiums (that created the reserves) should go back to the employers who have paid them.
And the bottom line? SAIF’s funds ought not be used as a piggy bank by Salem politicians trying to cover unsustainable costs in PERS.
"Many PIA members serve small businesses. SAIF has stepped up to serve this community of small businesses that often have difficulty securing coverage,” she said. “It provides a very reasonable price for a high level of worker benefits and safety. If SAIF reserves are swept, it is likely employer rates will increase substantially over time. This is not good for Oregon, small businesses or PIA members.”
In her news release on the decisions to shore up PERS, the governor said, “Oregon’s public employee retirement system, or PERS, is first and foremost an essential benefit for our public employees. In exchange for dedicating their lives to public service, Oregon has made a promise to provide them a secure retirement after decades of teaching our kids, fixing our roads, keeping our neighborhoods safe, fighting fires, or helping our children in foster care.”
Brown said it’s important to keep the promises the state made to those workers. Anything less is “kicking the can down the road.”
The editorial board of Portland, Oregon’s newspaper, The Oregonian published an editorial that urged the governor to reconsider her decision. It said:
“While the Legislature in 1982 passed a law expressly authorizing such a transfer, it would be controversial and risks destabilizing an entity that has competently, reliably and efficiently administered workers compensation for public and private employers for years. In trying to address the PERS crisis, Oregon should not do anything to trigger another,” the editorial board wrote.
In a story in Weekly Industry News last week, we referenced what happened with the 1982 decision of the Oregon Legislature. It authorized taking $80 million of SAIF’s reserves. A lawsuit followed and the Oregon Supreme Court said the state acted illegally and ordered the money returned.
With interest, $225 million was returned to SAIF and its policyholders. The attorneys fees and the cost of the litigation totaled a staggering $20 million.
If a decision is made by the Legislature to grant the governor’s decision to take that money, Weekly Industry News assumes lawsuits will be filed.
PIA Oregon is part of a coalition of business groups and associations opposing the governor’s decision. The group published a response a couple of weeks ago when the governor began talking seriously about taking the SAIF funds.
“SAIF’s revenue’s come via premiums from the 47,000 small businesses, school districts, nonprofits and local governments who depend on the company to cover their workers,” the group wrote. “The system is working well for workers and employers and this could significantly disrupt the balance that exists within the system. Make no mistake that this will impact rates paid by employers as SAIF fights to rebuild it’s reserves.”
The group called the governor’s decision, a dangerous game.
“They are literally stealing from one pot to cover liabilities in another and hoping that you can pay it back before something bad happens. That’s a dangerous game,” the coalition stated.
“Additionally, that would require significant changes to SAIF’s operating structure and should be done after careful study rather than as a hasty bailout strategy for PERS. SAIF is unlike other insurers in that it operates solely within the state of Oregon and is required to focus 100% on workers comp (mono-state and mono-lines).”
Republicans immediately criticized the SAIF raid decision. House Republicans said, “While recent Secretary of State audits reveal many agencies are prone to waste, SAIF has built enviable reserves, annually returning dividends to clients and covering thousands of claims. Ironically, cash reserves built on years of workplace safety and sound fiscal practice are viewed as easy pickings to shovel into the ever-deepening PERS pit.”
Mike Salsgiver is the Executive Director of the Associated General Contractors. He agrees and said SAIF’s reserves should be off limits. “You can be certain that raiding hundreds of millions of dollars from SAIF's reserves will negatively impact worker safety and accident prevention. That means higher rates for employers, reduced benefits for workers, or fewer investments in accident prevention. Any way you cut it, Oregon small businesses and workers lose,” he said.
Oregon Business & Industry represents Oregon’s largest employers. Spokeswoman Samantha Tipler said her group agrees that the SAIF raid is a bad idea. “We will strongly oppose this effort to raid SAIF to bail out PERS. The PERS solution should stand on its own.”
The governor’s PERS rescue plan has a couple of other components:
• After giving each family $100, the state will keep — one time — the income tax kicker. Brown hopes it will raise $400 million to 500 million.
• Repatriation funds already dedicated under 2018 Senate Bill 1566 (and Senate Bill 1529) for a total of $83.3 million.
• Windfall revenue from variable sources, including direct, above-trend revenues from capital gains and estate taxes to the account.
Keeping the kicker — funds returned to Oregonians if tax collections exceed income projections by 2% — will require a two-thirds vote by the Legislature to happen. It has no chance since the idea has to get support from both parties.
In last week’s Weekly Industry News, we covered a letter to The Oregonian from former PIA Oregon/Idaho president Rich Kingsley. He hit the nail on the head with his description of the governor’s decision.
“It was a stupid stunt then,” Kingsley wrote. “And to think of doing it again is still stupid, and reckless.”
Source links: Governor Kate Brown, Weekly Industry News — link 1, link 2, link 3, OregonLive.com, Willamette Week