Gov. Bill Ritter is wise to consider a potential deal with Pinnacol Assurance that could net the state hundreds of millions of dollars at a time when the budget has been clobbered by the recession.
But many important questions need to be answered and fully vetted publicly before taxpayers and business interests can feel comfortable thinking it’s a good deal.
It’s smart to have Morgan Stanley, at Pinnacol’s expense, assess the value of the worker’s compensation provider, which operates as a quasi-governmental insurer of last resort, often providing must-have coverage to the riskiest of occupations.
Fearing a new culture of state regulation, Pinnacol’s executives essentially want to privatize their business and sever most of the little control the state exercises over the entity.
The ongoing legislative battle to erase a dozen tax exemptions to raise $140 million illustrates the importance of the deal, which sources indicate could mean at least $200 million for the state. But Ritter needs to make certain the agreement isn’t something the state regrets years down the road, when the windfall of cash is just a memory.
Of paramount importance is the safety of Colorado workers and the state’s ability to attract business.
Besides the up-front, onetime payment, Pinnacol’s president and chief executive, Ken Ross, tells us he wants to give up the exemption from state taxes — worth about $5.3 million a year — to gain greater independence. He fears that current legislative bills to change the makeup of the Pinnacol board and to require refunds to policyholders based on an arbitrary formula would “destabilize” the provider.
Ross’ plan would allow Colorado’s governor to continue to appoint the majority of Pinnacol’s board and would continue to cement the provider’s obligation to offer last-resort workers’ compensation coverage. Those provisions are good for Colorado, he said, and good for the would-be private company, as they would allow Pinnacol to continue to enjoy tax-exempt status from the IRS.
But a privatized Pinnacol would no longer have to open its records to the public, or open the meetings of its board. It also would be free of the scrutiny of the legislature.
Colorado Insurance Commissioner Marcy Morrison has said she thinks the state has just the right balance with Pinnacol as it is, and lawmakers and employers alike have expressed concerns about a privatized insurer. Her concerns need to be heard and weighed carefully.
And what about that loss of transparency? What risks, if any, would workers face?
What risks would taxpayers face?
Pinnacol’s employees are covered by the Colorado Public Employees’ Retirement Association. Would they be going forward? If so, how does that make financial sense?
As Ritter’s office works through these questions, we hope the process is as transparent as possible and that the public has access to the analysis that addresses those concerns.
Any deal needs to make sense over the long haul, and not just now, when the state is hungry for cash.
