Advocates, lawmakers focus on SIF insolvency

Dozens of people with work-related injuries converged on the Capitol last week to plead with lawmakers to find a way to salvage the Second Injury Fund, and there’s some interest from legislative leaders in trying to find a solution.

Senate President Pro Tem Rob Mayer, R-Dexter, held hearings on two starkly different bills to address the issue, though neither offers the full solution the affected people or their attorneys want. Business groups, meanwhile, have split in their reactions to the proposals.

The fund is running out of money after legislators capped the business surcharge in 2005 at 3 percent of workers’ comp premiums. That amount of money isn’t enough to meet the fund’s obligations, and Attorney General Chris Koster told lawmakers the fund will become insolvent by the middle of this year and will be $20 million in the hole by the end of the year.

Koster warned in a letter dated Feb. 7 that within six weeks — which translates to the end of last week — the fund won’t be able to fully pay two types of claims: those who get lump sum payments for permanent partial disabilities and those who receive payments every two weeks for permanent total disabilities.

Koster said that’s particularly troubling for the 900 or so people who receive those total disability payments and rely on that money for daily living expenses. But regardless, Koster sought legislative guidance on what to do if legislators desire to let the fund run out and dissolve.

David Roberts traveled to the Capitol from Salem to share his story with lawmakers and urge them to shore up the fund.

Roberts said he was injured working in a lead mine in Bixby and suffered his second injury at another mine in Kansas City. He has undergone three back surgeries and receives payments for permanent total disability every two weeks. That money covers daily needs such as groceries and utilities, he said.

He has applied for jobs since being hurt but said companies won’t consider him because he was injured at work and can’t pass a physical.

“They look at you like you have leprosy,” he said. “They want nothing to do with you because you’re disabled. This is the only income I have.”

Some days he could work a full day without a problem, he said, but others “I can’t even get out of bed.”

If the payments stop, Roberts worries about the consequences.

“I would lose my home, basically everything that I have,” he said.

Koster also warned that a federal lawsuit arguing Second Injury Fund payments are an obligation of state general revenue, if successful, could be a serious burden on the state budget.

Attorney general spokeswoman Nanci Gonder said the office hasn’t taken a position on any of the legislation.

One of Mayer’s bills, SB420, simply dissolves the fund. The other, SB430, would provide a solution for those currently owed money from the fund, but it also limits the fund’s scope going forward. The bill would temporarily increase the administrative charge businesses pay and loan that money to the Second Injury Fund to handle current obligations. Eventually, that charge would go back down.

The legislation would no longer allow for permanent partial disability payments after the bill goes into effect. In the future, claims against the fund would be limited to those whose injuries result in a permanent total disability who also previously had either a permanent disability due to military service or a preexisting permanent partial disability of a certain level. The proposal also sets caps on most Second Injury Fund settlements at about two years’ worth of wages.

The measure also would provide that fund payments aren’t available if someone seeks workers’ comp in another state; life payments could cease once someone starts drawing Social Security disability; and suspends life payments if someone who has been permanently disabled, with the help of eyeglasses, prosthetics or rehabilitation, returns to a regular job or is otherwise able to find gainful employment.

Mayer did not return a call seeking comment.

St. Louis attorney Philip Hess, president-elect of the Missouri Association of Trial Attorneys, said SB430 would help current beneficiaries but greatly reduce the fund’s scope in the future.

Hess said the fund’s pending insolvency is already causing pain. Clients who just won trials providing them with Second Injury Fund payments, as of March 7, aren’t getting paid, he said.

“Without a financial fix, this problem is going to end up in the courts,” said Hess, of Larsen, Feist & Hess.

In fact, a group of beneficiaries already filed suit in federal court in February, arguing the state is at “imminent risk” of failing to meet its financial obligations, but it hasn’t progressed much yet.

Sen. Jolie Justus, D-Kansas City and an attorney, said she’s waiting to see if legislative leaders reach a compromise with the various business and legal interests before she thoroughly researches the proposals.

“There’s a fundamental disagreement on how to get that done,” she said. “Every idea to fix it has been met with so much hostility by the business community.”

In fact, Missouri’s two main business groups have reached opposite conclusions about Mayer’s proposals.

Nathan Dampf, a spokesman for Associated Industries of Missouri, said his organization’s members overwhelmingly are opposed to any increase in taxes, and that Mayer’s proposal to pay Second Injury Fund shortfalls through the administrative fund appears to be “a roundabout way to increase the tax.” On the other hand, he said, Mayer’s proposal to dissolve the Second Injury Fund is a “great solution.”

In contrast, the Missouri Chamber of Commerce and Industry threw its support behind the increase in the administrative tax.

“Anyone who thinks business should sit idle while the Second Injury Fund goes bankrupt is irresponsibly inviting fiscal disaster on Missouri’s workers’ compensation market,” chamber  lobbyist Karen Buschmann said in an e-mail.

The chamber said the bill is expected to raise businesses’ workers’ comp premiums by 7 to 10 percent as employers become liable for cases that no longer fall under the fund. But if the fund just closes, it said, premiums could rise by 11 to 15.5 percent.

With the bill, businesses also would have to pay another $45.5 million for three years to help the fund meet its obligations under current law, but that’s essentially an advance that businesses would recoup later. Also, in the long run the chamber believes the bill will help by limiting the fund’s scope for future claimants.

“Something had to be done. There’s no good answer,” she said.

There have been several unsuccessful attempts in previous years to address the Second Injury Fund’s projected insolvency, though none have been quite as ambitious as Mayer’s bills.

Ray McCarty, president of Associated Industries, said there’s a better chance this year of passing something. But he noted that lawmakers have been very reluctant to raise taxes.

“I don’t see them changing that position just because it’s the Second Injury Fund,” he said.

Scott Lauck contributed to this report.