The state workers’ compensation fund has filed suit to invalidate a $30 million charge on its investment assets – a charge approved last week by the Legislature to help balance the state budget.
The Montana State Fund, a quasi-governmental body that writes work-comp insurance for about 26,000 businesses and government agencies in the state, asked a state judge in Helena Friday to block any transfer of the money and to declare the new law authorizing the charge unconstitutional.
“Montana State Fund funds and assets belong to MSF policyholders and cannot be encumbered by the Legislature,” the suit said. “… It is not the duty of MSF policyholders to solve the state’s fiscal problems.”
State District Judge Mike McMahon on Friday denied the State Fund’s initial request for a temporary restraining order blocking transfer of the money, but set a Dec. 4 hearing on the case.
The Legislature approved the bill transferring the money last Wednesday as one of several measures to erase a $227 million shortfall in the state’s two-year budget. Gov. Steve Bullock had yet to sign Senate Bill 4 into law as of Monday afternoon, but his administration proposed and supported the bill.
Ronja Abel, a spokesman for the governor, said Monday his office has “serious concerns about the propriety of the lawsuit, and it appears the court feels the same way.”
But State Fund President Laurence Hubbard told MTN News that the judge hasn’t decided the merits of the case, and that rejection of the restraining order is not unusual.
The bill imposes a special management fee on any Montana State Fund assets over $1 billion, held by the state Board of Investments. The fee will generate nearly $30 million over the next two years and transfer the money to the state treasury, to help balance the budget.
Hubbard said on Nov. 10, the State Fund’s board of directors authorized him and his staff to oppose the bill at the special session and take any “legal means necessary” to prevent the transfer.
He said the bill improperly takes money that was paid originally by policyholders, for insurance against on-the-job injuries.
“Policyholders pay premium for payment of workers’ compensation benefits to injured workers,” Hubbard said in an interview. “They don’t pay premium to pay for the fiscal crisis of the state. …
“It wouldn’t matter if it were $10 or $10 million – the question is, are these assets public monies, or are they monies that are held in trust for the policyholders and their injured workers?”
The lawsuit echoed those objections, saying money collected by the fund from policyholders is to pay for claims and injuries, and, under state law, can’t be used for “any other purpose.”
It also said any earnings on investments by the State Fund are the “sole property of the Montana State Fund.”
The State Fund said it paid the Board of Investments $334,000 in management fees in the year ending June 30, and that the $30 million fee charged under SB4 is “simply a pretext for an improper taking of funds” and “bears no relationship to any legitimate, appropriate, justified or legal asset management fee.”
The bill imposing the charge on State Fund investments violates constitutional provisions that forbid laws that impair “obligation of contracts” and that say work-comp investment funds must be managed in “the same manner that a prudent expert … would use in the conduct of a private insurance organization,” the lawsuit said.
(Montana State Fund CEO Laurence Hubbard)