AG says 'end is near' for troubled disability fund

JEFFERSON CITY, Mo. -- Missouri's attorney general warned Wednesday that a state fund for disabled workers is on financial life support and suggested it should either be abolished or revamped so that it can be replenished by imposing larger surcharges on businesses.

Attorney General Chris Koster said he already has laid off about one-third of the attorneys who defend claims against the fund and has delayed $14.5 million of payments due to injured workers -- which are accruing interest at 9 percent -- to try to keep the fund afloat. But such "triage" efforts cannot sustain the fund much longer, he said.

"There comes a time when every physician must tell his patient's family the difficult truth: The end is near. I'm here today to share that truth with you," Koster told members of the Missouri Chamber of Commerce and Industry who were holding a conference.

Missouri's Second Injury Fund has been headed toward insolvency for several years, yet the legislature has been unable to agree upon a solution.

The Second Injury Fund is intended as an incentive for businesses to hire people with disabilities. If someone with an existing disability suffers an additional work-related injury, the fund pays the additional benefits due to that person.

In 2005, when the fund had $25 million in reserves, Missouri's Republican-led Legislature passed legislation capping the fee charged to businesses at 3 percent of their workers' compensation premiums, instead of allowing the rate to fluctuate based on the fund's annual expenses. The fund balance has dramatically declined since then, even as Koster's office stopped agreeing to settlements and -- as of last March -- quit paying benefits to people awarded new judgments.

Attorneys for some of those people have brought court cases demanding the money. If judges around the state grant those requests, Koster said there could be a run on the fund's remaining $9 million that could quickly drain it and force him to lay off the rest of his office's attorneys who defend the fund.

The Missouri Chamber of Commerce and other business groups have been working with legislators on a proposal that would replenish the fund by raising the surcharge cap, creating a four-person board of elected officials that could raise the surcharge rate even higher, and by scaling back the types of injuries that would qualify for compensation by the fund.

Koster said he would prefer the fund simply be phased out.

"The General Assembly has proven that government should not be in the insurance business," Koster said.

If lawmakers decide to continue the fund, Koster said he would oppose the creation of a four-person board -- consisting of himself, Gov. Jay Nixon and the leaders of the House and Senate -- to set the surcharge rates. Instead, Koster said the surcharge on businesses should be based on actuarial evidence and mathematics as determined by "competent experts."

Dan Mehan, the president and CEO of the Missouri Chamber of Commerce, said his organization supports the four-person oversight board because it gets "a lot of people's skin in the game."

"Hopefully they will use actuarial data -- that would be the ideal," Mehan said.