Opponents say tapping the workers' comp money for a rainy-day fund would be illegal

Tuesday, January 23, 2001

By Lisa Grace Lednicer of The Oregonian staff

SALEM -- A prominent Salem lobbyist is quietly trying to assemble a coalition of businesses and unions to persuade lawmakers to tap into the state workers' compensation fund to shore up the state's budget.

Paul Phillips, who represents the Oregon Business Association, said the Legislature should use the interest from a portion of Saif Corp.'s $2.5 billion accident insurance fund to create a "rainy-day" account that lawmakers could draw from in economic hard times. He said workers' compensation claims would be protected because the fund's principal would remain intact.

But despite a tight budget, Republican lawmakers do not appear eager to tinker with the fund that compensates injured workers, a move that backfired once before. The Legislature took money from the fund in 1982, but the courts reversed that decision, and the state was required to repay $225 million, almost triple the original amount, to policyholders.

The proposal angered Katherine Keene, president and chief executive officer of Saif, the corporation that administers the fund with a board appointed by the governor.

"The proposal is a Trojan horse," Keene said. "It is simply another attempt to raid the resources of the fund under the guise of good public policy. When people realize what this is, it will die on its own accord."

But Phillips said his plan is different from what lawmakers did in 1982 because he proposes that the Legislature tap future revenues instead of existing ones. He would use excess income generated by Saif's industrial accident fund, which he estimates at $100 million a year, to seed the rainy-day account.

And the state's estimated budget shortfall of hundreds of millions of dollars -- which has the Legislature considering cutting programs ranging from services for the elderly to state police -- shows that it's crucial for lawmakers to be able to direct money from a surplus fund in times such as these, Phillips said.

"As a former legislator, I know that it's easier to do things in times in crisis than in times of plenty," said Phillips, who served in the House and Senate from 1983 to 1995. "In these times, it's easier to get people focusing on putting the partisanship aside and figuring out the best way to do things."

Phillips' idea has generated strong support from Liberty Northwest, Saif's chief competitor and a member of the Oregon Business Association.

Fred VanNatta, a Liberty lobbyist, said Saif has paid dividends "way, way above" other workers' compensation insurers and has forced private insurers out of the market. He said the fund has accumulated such a large surplus over the years that some of the money could be diverted toward a rainy-day fund without endangering workers' claims.

But Keene said two outside studies Saif commissioned show that the corporation's $400 million surplus is too little as a hedge against the increasing cost of health care and prescription drugs. And even though the Legislature would tap future revenues, that still would mean less money for the fund to pay out in claims, she said.