Saturday, April 11, 2009

Give and take, Part II

It's no surprise, nor improper, for Colorado Attorney General John Suthers to order up an opinion on the legislative plan to balance the state budget with surplus assets of Pinnacol Assurance. It is inaccurate to call the opinion a ruling, however, as The Denver Post did in its Saturday morning editions.

The opinion is just politics; how one plays the game. And, yes, Republican AG Suthers is trying to influence the Democratic majorities in both houses of the General Assembly.

If Suthers can keep the Democrats from passing a law to take $500 million in employer-paid workers' comp insurance premiums from Pinnacol, the AG's office won't be forced to defend the law when some taxpaying or insurance-premium-paying Republican businessman or woman challenges it in court.

As The Post pointed out in its coverage, which started on its front page, the challenge to the Pinnacol law before it is even enacted echoes Suthers' challenge of a Ritter administration policy last year that allowed the state to collect more tax money from school property taxes. That law passed despite a negative Suthers opinion of it; it was challenged and upheld by the state Supreme Court; and the tax money that was collected helped fund Colorado schools.

The same result probably would be repeated in the Pinnacol situation.

Pinnacol is a quasi-government entity created by the state to offer employers low-cost workers' comp insurance and it has done such a good job of that it has built up a surplus of assets -- some might call the money surplus business taxes -- that serve to overprotect Pinnacol's ability to pay claims as well as serve as equity to support Pinnacol's ability to offer the low rates it charges private businesses.

Pro-business people naturally suggest the money should be kept by Pinnacol to enable it to continue the business tax breaks they get via the low insurance premiums.

Democrats who argue the money belongs to the state are essentially suggesting it be used for the common good of all Coloradans, not just to enhance the state's business environment.

Still, Suthers' opinion has weight and ought to be considered.

Democratic lawmakers, however, need not treat it like a ruling, and probably ought to do the same thing with it they did with the property-tax law: Pass it; get the governor to sign it, let the law be challenged, and then collect the money after the Colorado Supreme Court rules it's okay. Pinnacol might even have more of a surplus by the time that all happens, and new funds could help cushion the pre-set hit.

It may be that the Supreme Court could throw its own opinion into the legislative debate and save a lot of people a lot of wasted time.

But the Court's decisions can be just as political as the AG's, and, in politics, timing is everything.


  1. Your post brought questions to my mind. In florida, where I live, workers comp costs are significant factors particularly in construction industry.

    How did Pinacol build the surplus? Was it because they scrutinize claims so intensely that workers are short changed at the "claims window"? What type of analysis has been done on the claims paying component of the program? or did they just have a few good years of low claims due a shift in the demographics of the fund?

    The concept of insurance is to level out risk over time. Averaging out low claim periods with high claim periods. What would be the result if the excess is shifted out and the construction industry, as an example, begins to boom again and claims start rising? Employers would have to pony up more premiums creating an increase in building costs.

    Why not allow surpluses continue to rise until a big run on claims materializes? It eventually will. After the run reverses or stabilize they can can judge if there is a genuine surplus. Of course this would take a least one round trip move through the business cycle and politicians can not wait that long to get their greedy hands on the funds.

    This is another example of government getting too involved with business and not doing what is right for the people.

  2. Grandpa,

    Thanks for being a regular responder.

    As I undertand it, these monies are surplus, and beyond the need of the quasi-government entity's responsibility to fund projected claims.

    The money also is proceeds of Colorado employers' payment of premiums for state-required insurance. As such, you could call them business taxes, surplus taxes already collected.

    That's why I think they should be used for the greater good of all citizens of Colorado. Now they are simply being used for the greater good of employers.