Photo Credit: Times Union
The bipartisan budget recently passed in New York includes a massive raid of the State Insurance Fund, the state?s workers? compensation carrier of last resort. When I first heard about it a few weeks ago I was unable to find any coverage of it by the media, but now The Wall Street Journal has picked up on it.
New Yorkers have been treated this week to almost daily political perp walks, as a parade of office-holders have been rung up for bribery and other crimes. The big news here is that they were caught. The bigger scandal in the Empire State continues to be what the politicians do that?s legal.
Witness Governor Andrew Cuomo?s $1.75 billion raid of the state?s workers compensation fund to finance more spending. This year?s budget expropriates $500 million from the State Insurance Fund for a ?transformative capital? program?details still to come?and $1.25 billion to cover general fund expenses through 2016. Tapping off-balance sheet accounts is an old budget trick, but Mr. Cuomo has added some creative twists.
During the 1980s and early ?90s, Albany swiped $1.3 billion from the State Insurance Fund, which is supposed to be the insurer of last resort for small businesses that can?t obtain affordable policies on the private market. The state issued the fund an IOU, which remains on the fund?s balance sheet as an asset though realistically it?s worth about as much as the Argentine peso.
In 1983 Brooklyn?s Methodist Hospital sued the state for seizing policyholders? premium money without due process or just compensation. New York?s high court ruled in favor of the state, holding that the insurer was a state agency and not a mutual insurance pool. Therefore, the court reasoned, policyholders ?have no property or contractual interest in the surplus of the Fund,? and lawmakers could use the insurer as a piggybank.
Thanks a lot.
Due to a public backlash against the raids, Albany passed a law in 1996 forbidding the state from transferring money out of the insurance fund. But laws enacted by one legislature can be undone by another. And this year?s budget authorizes the state ?notwithstanding any law to the contrary? to transfer excess reserves out of the fund totalling $1.75 billion.
Read the whole thing. With increasing medical costs and higher wage loss benefits it wouldn?t be surprising to see the SIF run out of money to pay the claims. If that happens New York taxpayers will be on the hook, just like all US taxpayers footed the bill for the subprime mortgage schemes Cuomo helped to concoct during the Clinton years. Unfortunately, Republicans in the state senate went along with this scheme and now Cuomo?s airing ads touting his successful budget. What a sham.
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