Lawmakers playing a high-stakes game of chicken under the Gold Dome this week ought to hit the brakes — and hit them hard.
Desperate to close the gaping holes in the state’s budget for this year and next, the Joint Budget Committee is threatening to cut nearly half of the state’s funding for higher education — $300 million — unless a quasi-state agency agrees to raid its holdings and hand over $500 million.
We understand the strain the JBC is under, but we fear its members are acting recklessly as they demand Pinnacol Assurance immediately hand over $300 million for the coming budget year, which starts July 1, and $200 million for the next.
The committee argues it can make this demand of Pinnacol because the legislature created the company’s predecessor in 1915 to serve as the safety net for small companies that have difficulty providing or cannot provide worker’s compensation insurance. But the 21st century Pinnacol is a much different business entity, and its president, Ken Ross, tells us that he considers the JBC’s request illegal.
That assertion has led to the JBC threatening to craft legislation that could force Pinnacol to transfer the money.
Meanwhile, Pinnacol’s mission has nothing to do with funding Colorado’s higher education system, so the JBC’s threats to close community colleges if Pinnacol doesn’t act are an inappropriate, strong-armed tactic.
Pinnacol’s mission is to provide worker’s compensation insurance, even for those employers that cannot afford private-sector coverage, and to thereby stabilize the worker’s compensation system in Colorado. It provides insurance for some of the state’s most dangerous occupations.
In recent years, the company has been successful in its mission. It has reduced premiums by 42 percent in the past four years and refunded through dividends nearly $300 million to its policyholders. According to Ross, only seven other states have lower premium rates for the coverage than Colorado.
To do its work, Pinnacol’s actuaries require that the company keep $1.3 billion of its more than $2 billion in total assets available to cover liabilities. Ross argues that if the state raids $500 million from the $684 million Pinnacol carries in surplus, which exists in investments, the company wouldn’t be able to cover any emergency contingencies, and might not be able to keep the company secure enough to keep its rates low.
Lawmakers dispute those numbers, and argue that the $500 million they seek would leave behind at least a $200 million cushion in case of contingencies.
Perhaps so. These are complex issues, and shouldn’t be acted on in haste.
The JBC might be able to work with Pinnacol to find ways that its surplus could help plug deficits, but the committee should allow the insurer time to analyze its holdings, consult with its accountants and attorneys and make informed decisions.
Otherwise lawmakers risk setting a terrible precedent.
