(c) 2022 Jon L Gelman, All Rights Reserved.

Saturday, November 24, 2012

The "New Normal," Special Compensation Funds and Viability

An Arizona Appeals Court has ruled that Special Funds [Second Injury Fund] used to pay workers' compensation benefits and fund the administrative agency, can be transferred to the state’s general treasury and used to fund the state’s general liabilities.

The Court , in allowing $4.7 Million to be transferred by the state Legislature to the general treasury, held that the special fund was funding source subject to legislative review and appropriation.  “….Because the legislature set the  percentage rate of premiums from the  State  Compensation Fund and private carriers to be placed in the Special Fund, the funds are public monies,” and is therefore a public fund.

Second Injury Funds have been phased out throughout the US. Major industrial states have eliminated them over the past several decades, a move historically supported as employers, insurance companies and the American Bar Association.

New Jersey still has such a fund, ie., The Second Injury Fund. It has been decimated economically after the economic downturn and a series of similar repeated raids by the legislature. While a constitutional amendment has been enacted to prohibit raids, the economy has not increased enough to withstand the fiscal challenges.

Other states face similar problems. Missouri’s fund has not been able to pay beneficiaries for decades as it heads for extinction. New York’s fund has been challenged since assessments are soaring beyond what Industry feels are sustainable in the week economy.

The real challenge facing the nation’s patchwork of workers’ compensation programs is how to fund them generally in light of increased medical costs, lack of premiums due to unemployment and the “new normal” now emerging across  the nation.

Read the decision: Industrial Commission of Arizona, et al. v. Janice K. Brewer, Governor, et al. , 1 CA-CV 11-0119 , (AZ App 2012), decided 11/23/2012.