Work-Comp board will consider withdrawing lawsuit opposing $30M transfer

HELENA – Less than two weeks after filing suit to block a $30 million transfer of its funds to help balance the state budget, the state workers’ compensation fund board may vote to withdraw the lawsuit.

The Montana State Fund’s board of directors has scheduled an emergency meeting this Wednesday, to consider whether it should withdraw the suit filed Nov. 17 in state District Court.

The seven-member board that oversees the quasi-governmental insurance fund also now includes two new members appointed Nov. 17 by Gov. Steve Bullock – who proposed the $30 million transfer and last Friday signed into law the bill authorizing it.

Rep. Greg Hertz, R-Polson – an opponent of the transfer – told MTN News Monday that the governor’s office has been pushing the State Fund board to reverse course on the lawsuit.

“The governor is being very transparent,” Hertz said. “He’s actually put two individuals on the board who will do his bidding and his staff has been talking to other board members, and they’re working hard to reverse the board’s decision and withdraw the lawsuit.”

Bullock appointed the new State Fund board members – former state Sen. Cliff Larsen of Missoula and attorney Jim Molloy of Helena, a former adviser to Bullock – within hours after the lawsuit was filed.

Larsen and Molloy replaced two board members who had voted Nov. 10 to authorize the State Fund to oppose the $30 million transfer.

Bullock’s office had no immediate comment Monday morning and board Chairman Lance Zanto, a worker’s compensation administrator for the state, had not returned a message.

The State Fund writes work-comp insurance for 26,000 businesses in Montana, insuring them against on-the-job injuries.

Two weeks ago, the state Legislature approved a package of bills to fill a $227 million hole in the state budget.

Among the measures was Senate Bill 4, which imposes a one-time fee on the work-comp fund’s reserves invested with the state Board of Investments. The fee amounts to nearly $30 million over the next two years and will be transferred to the state treasury to shore up the state budget.

At its Nov. 10 meeting, the State Fund board of directors opposed by the bill and authorized fund officials to take legal steps to stop any transfer of funds.

The lawsuit filed by the State Fund Nov. 17 said state law and the state constitution essentially forbids using work-fund funds for any purpose other than paying claims and costs associated with work-comp insurance, because the money is paid by policyholders.

Supporters of the transfer have argued it’s a one-time charge that will not hurt the financial position of the State Fund.

Business groups generally opposed SB4 earlier this month, saying that work-comp funds should not be used to balance the state budget, and should be reserved only for the benefit of policyholders and injured workers.

Hertz said Monday there’s no guarantee the State Fund won’t need that money in the future. Unforeseen events, such as court rulings or a “major correction” by the stock market, could greatly reduce the value of State Fund reserves, he said.

“There’s a lot of issues that could happen that could impact the reserve of the State Fund,” he said. “(The transfer) is just not a good idea.”