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HomeMy WebLinkAboutRes2004-020 I I I Sponsored by: Shealy CITY OF SEWARD, ALASKA RESOLUTION 2004-20 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEWARD, ALASKA, OPPOSING SENATE BILL 276 IMPOSING A 2% ANNUAL ASSESSMENT ON JOINT INSURANCE ARRANGEMENTS AND SELF- INSURED EMPLOYERS WHEREAS, Senate Bill 276 is the proposed bailout for the Alaska guaranty fund made necessary by the recent insolvencies of several workers' compensation insurers; and WHEREAS, the bill proposes a two percent assessment on all workers compo expenses paid out annually by a joint insurance arrangement or self-insured employer; and WHEREAS, the City of Seward is a member of the Alaska Municipal League Joint Insurance Association (AMUJIA) and as a member would be subject to the assessment proposed by SB276; and WHEREAS, the City of Seward is concerned about the budget implications for the City and other municipalities in Alaska with Senate Bill 276; and WHEREAS, self-insureds and joint insurance arrangements get no protections under the guaranty fund; and WHEREAS, local governments are being asked to pay for something with public funds while receiving no benefits. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SEWARD, ALASKA, that: Section 1. The City Council opposes Senate Bill 276 imposing a 2% annual assessment onjoint insurance arrangements and self-insured employers. Section 2. The City Council respectfully requests that the provisions of SB276 assessing self-insureds and joint insurance arrangements be removed from the bill. Section 3. This resolution shall take effect immediately upon its adoption. PASSED AND APPROVED by the City Council of the city of Seward, Alaska, this 23rd day of February, 2004. CITY OF SEWARD, ALASKA RESOLUTION 2004-20 AYES: NOES: ABSENT: ABSTAIN: ATTEST: THE CITY OF SEWARD, ALASKA C&J~ C. David Brossow, Mayor Branson, Dunham, Clark, Valdatta, Amberg, Shafer None Brossow None J~ City Clerk .,\tUJu.." \.., ... S"" ".t' (City Seal) ,.;. .1 Or' ..: [,1~ ,., -t;. ..t:......\, ..... . - -Y.") '~ ~.,." "':,' .~~~POJ:i:".. II')~" ~ .:- v,"cP . ~~"'v -:. 1 :.:; ......e- \..')." ~ ,\ ",. ~ l.. '. ., T . .- : 0: SE'\..L1 : 0 :: ~ : ... .. ......-. 1;0'" ;: ~ n"... -:.,"&.. ~".,:.',?",:- .~, ~.'~/V!l:l '\ J~' ..,~ ... .."':.. .;........~~, ~ ", ,.;.. \r" .... ", -, 11,. p..... ,..' i!?',~~!!", .~~,\, CITY OF SEWARD, ALASKA RESOLUTION 2004-41 AYES: NOES: ABSENT: ABSTAIN: Dunham, Branson, Valdatta, Clark, Amberg, Shafer None Brossow None ATTEST: '" ~. !(~"L / \ ; ~--~<;u'-z';<J Jean tewis Citytlerk -' ""un."" (City ~~~O~.~~~A1~"'~ $ ,,~~""~OFt4;:... ~ \ ~ "'l ~<,'..-:. ~ ......:.-..- ... - . . .. : : SEtAL i.: :., " :: '1\ -0- .': ~ e. "'.... '\ '~.'~~N! 1 ..?>~~I "'~~..... .......1.. h:'"'".f#t ....~ '1: OF Jl..\.~~. ~..lInu'" COUNCIL AGENDA STATEMENT Meeting Date: February 23, 2004 Through: Phil Shealy, City Manager From: Rick Gifford, Assistant City Manager Agenda Item: SB276: Alaska Guaranty Association Legislation BACKGROUND & JUSTIFICATION: The Alaska Guaranty Fund was established by the State of Alaska and is used to pay for claims of insolvent insurers. Insurance companies currently pay a 2% tax on premiums into the fund. Recent insolvencies of Freemont, Legion and Reliance have left the Guaranty Fund holding the bag of $60,000,000 in unpaid claims. Senate Bill 276 sponsored by the Governor proposes the following changes to the fund: · Raises the maximum assessment against insurers doing business in Alaska to pay guaranty fund claims from 2% to 4% of workers comp. premiums; · Allows the fund to assess other insurers, such as auto and homeowners, 2% of premiums to help cover shortages in the workers comp. arena; ’ · Changes the law to allow the fund to assess self-insureds and joint insurance arrangements (pools), such as the AML/JIA, 2% of workers comp. claims paid; ’ · Allows the Alaska Industrial Development and Export Authority (AIDEA) to guarantee loans made to the fund to cover claims. The City is a member of the Alaska Municipal League Joint Insurance Association (AML/JIA) and as a member would be subject to the assessment proposed by SB276. Neither joint insurance arrangements like the AML/JIA nor self-insured employers are eligible to receive any benefit from the fund. As a member of the AML/JIA, the City can be assessed additional monies in the event that the pools reserves are needed to protect ’ injured workers. SB276 amounts to a subsidy by local governments of the private insurance industry that engaged in poor business practices. It is nothing more than a new tax, which will result in an automatic increase in premiums for local governments on top of other anticipated workers comp increases, which NCCI already estimates could average ’ 22-32% for 2004. The provisions assessing self-insureds and pools are projected to generate about $1 million. Removing self-insureds and pools from the bill will have only a minor impact on the bill’s revenue raising provisions, and will not undermine the bill’s primary purpose, to put significant additional funds into the guaranty fund. Although the assessment on public entities under the bill is small relative to the other bill provisions, the City of Seward is already dealing with other budget issues resulting from increased insurance and employee benefit costs to unfunded mandates from the federal and state governments. COUNCIL AGENDA STATEMENT Meeting Date: February 23, 2004 SB 276 Page 2 Self-insureds and joint insurance arrangements get no protections under the guaranty fund. Thus, local governments are being asked to pay for something with public funds, while receiving no benefits. The City believes that private insurers rightfully should be paying for the fund, since they are essentially paying for a service. SB276 is on a fast track for approval. The administration previously sent a letter (copy attached) to Senator Con Bunde who is the Chairman of the Senate & Labor Commerce Committee with copies to Senator Gary Stevens and Representative Seaton in opposition of the provisions assessing pools and self-insureds in SB276. CONSISTENCY CHECKLIST: Yes No 1. Comprehensive Plan 2. Strategic Plan 3. Other 4. Not applicable X FISCAL NOTE: If SB276 is approved as introduced, the cost to the City of Seward would be approximately $4,000 with projected increases each year. The cost to the AML/JIA is projected to be approximately $100,000. Approved by Finance Department: RECOMMENDATION: Council approve Resolution 2004-20, opposing Senate Bill 276 imposing a 2% annual assessment on join insurance arrangements and self-insured employers.