Alliance Says Gov.’s Stance on Utah State Fund Debate ‘Right on Track’

July 21, 2003

Efforts by Utah Gov. Mike Leavitt (R) to make sure the debate over the future of the Workers Compensation Fund of Utah (WCF) and its subsidiaries focuses on “big picture” issues and doesn’t degrade into an argument over details is serving the best interests of Utah citizens, according to the Alliance of American Insurers.

In a July 14 letter to legislators, Gov. Leavitt expressed his views that the state needs to refocus and redefine the fund’s original core mission. The WCF has sought legislation to “privatize” while retaining its federal income tax exemption.

“The governor is right on track,” said Keith Bateman, vice president of workers compensation and health for the Alliance. “For years, the fund has been moving away from its original mission of serving as a guaranteed market for the workers compensation insurance needs of Utah employers, morphing into a multi-state carrier – all the while saying it’s just doing so to better serve Utah employers. It is time that the Utah legislature takes a hard look at what’s really happening.

“The Alliance agrees that the fund should be privatized, but what the fund is proposing isn’t privatization. The fund claims to be a mutual-type insurance company but doesn’t want to be regulated and taxed like one. That just isn’t fair. Especially when they are using that exemption to fund a subsidiary writing in other states.”

Besides rethinking the fund’s mission, Bateman suggested that an even more fundamental issue needs to be addressed: Should the State of Utah be in the insurance business at all? “If there ever was a historical need, the Alliance doesn’t think it exists today,” he said.

Bateman called on the Utah business community to look at proposals not only in terms of their immediate self-interest, but also in terms of a commitment to the free enterprise system. “How would the business community feel if Nevada created a tax-exempt corporation that conducted business in Utah with Nevada providing capital accumulated on a tax-free basis and being able to shelter a substantial portion of the business’ profit from taxation so it could sell its product or service at a lower price than that of its Utah competitors?” Bateman asked. “I doubt that they would be very happy about it.”

As an alternative to the WCF’s so-called privatization plan, Bateman pointed out that several successful precedents for privatizing state funds exist. “Michigan and Nevada accomplished the privatization process in a way that was fair to all interested parties,” he noted. “I urge the Utah legislature to examine these alternatives as the process moves forward.”

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