State Laws that may have been broken
We will next discuss each of these four issues.
1. USE OF TAX PAYER DOLLARS TO FUND POLITICAL CAMPAIGNS
Here is the law that prohibits the use of tax payer dollars to finance political campaigns:
RCW 42.17.128 Use of public funds for political purposes.
Public funds, whether derived through taxes, fees, penalties, or any other sources, shall not be used to finance political campaigns for state or school district office.
[2008 c 29 § 1; 1993 c 2 § 24 (Initiative Measure No. 134, approved November 3, 1992).]
The BIAW has claimed that Retro subsidies are not tax payer money. They are merely refunds or alternate uses of retro premiums. But Workers Compensation (including retro) premiums are tax payer dollars as is made clear by the following statute:
RCW 51.08.015 "Amount," "payment," "premium," "contribution," "assessment."
Wherever and whenever in any of the provisions of this title relating to any payments by an employer or worker the words "amount" and/or "amounts," "payment" and/or "payments," "premium" and/or "premiums," "contribution" and/or "contributions," and "assessment" and/or "assessments" appear said words shall be construed to mean taxes, which are the money payments by an employer or worker which are required by this title to be made to the state treasury for the accident fund, the medical aid fund, the supplemental pension fund, or any other fund created by this title.
It is especially clear that retro subsidies are public funds when the subsidies exceed the difference between premiums and claims. Since the entire amount of the premium was used to pay for claims, what else could the subsidies be besides public funds?
2. UNFAIRLY SHIFTING THE WORKERS COMP TAX BURDEN FROM RETRO TO NON-RETRO PROGAMS
WAC 296-17-90402 requires that retro employers as a group and non-retro employers as a group fund the same portion of their total claim costs relative to their total premium charges.
In other words, each group is required to have the same final loss ratio. (Loss ratios are simply total claims divided by total premiums… a loss ratio greater than one means that claims are greater than premiums). L & I claims that they insure that the loss ratios are equal by adjusting the Performance Adjustment Factor (PAF). However, this claim does not appear to be true because Retro Refunds were issued even when the PAF was greater than one.
We have described at least four areas where the tax burden was shifted from retro to non-retro. These include the double entry computer coding error, the mis-assignment of occupational disease claims, the 45 month retro adjustment limitation and the numerous L & I attempts to deceive oversight groups about the true costs of retro claims (including but not limited to submitting false data to the Wyman study authors). All of these policies and actions were likely violations of WAC 296-17-90402.
3. UNFAIRLY SHIFTING THE TAX BURDEN FROM RETRO PROGRAMS TO THE TAX PAYERS
RCW 51.16.100 Classification changes.
It is the intent that the accident fund shall ultimately become neither more nor less than self-supporting…
RCW 51.16.105… Departmental expenses, financing.
All department expenses relating to industrial safety and health services of the department pertaining to workers' compensation shall be paid by the department and financed by premiums…
Given these two laws, why is the Workers Comp program being allowed to put the tax payers in debt with long term obligations of more than $40 billion dollars? Also these two laws make it clear that premiums must be adequate. It is not permissible to bankrupt the Accident Fund just to give out Retro subsidies.
4. L & I FAILURE TO REQUIRE RETRO GROUPS TO FULLY RETURN RETRO SUBSIDIES RESULTING FROM L & I FORMULAS INCONSISTENT WITH WAC 296-17-90402
On Friday, September 25, 2009, at a Retro Proviso Study group meeting, L & I issued a written 15 page “Response to Oliver Wyman Actuarial Examination of Retrospective Rating Plans. On page 9,in response the Wyman’s conclusion that L & I handling of Occupational Disease Claims was “actuarially unsound,” in assigning all of the unknown claims burden to non-retro instead of fairly dividing the burden of such claims, L & I stated:
“The agency agrees that this procedure for allocating occupational disease losses is not equitable and must be revised. .. A final decision about the rule language and the effective date will be done on or after September 29, 2009. Any change will apply prospectively, impacting retro enrollments for future coverage years. The current method negatively impacts all non-retro employers by including all non-chargeable occupational disease claim costs as non-retro losses. Implementing the recommendation will reverse this, lowering the overall retro refunds.”
(emphasis added)
After agreeing that the current method is in violation of WAC 296-17-90402, it is contrary to State law for L & I to fail to retrospectively recover retro subsidies which retro groups should never have received in the first place. This is the law they are violating:
RCW 51.48.260 Liability of persons unintentionally obtaining erroneous payments.
Any person, firm, corporation, partnership, association, agency, institution, or other legal entity, but not including an industrially injured recipient of health services, that, without intent to violate this chapter, obtains payments under Title 51 RCW to which such person or entity is not entitled, shall be liable for: (1) Any excess payments received; and (2) interest on the amount of excess payments at the rate of one percent each month for the period from the date upon which payment was made to the date upon which repayment is made to the state. [1986 c 200 § 3.]
Note the word SHALL. It is not legal for L & I to fail to recoup the $500 million dollars in retro subsidies that were given to retro groups due to the computer coding error and the Occupational Disease Mis-assignment error.
At $30 million per year, even if only going back 10 years, retro groups need to be required to return the $300 million that was erroneously given to them from the Accident Reserve Fund. They also need to return the entire $150 for the coding error – plus interest on the entire $450 million - bringing the grand total to over $500 million that retro groups owe the tax payers.
L & I proposals to only recover $30 million of the $150 million and not a penny of the $300 million are a blatant and reckless disregard of the law and a failure to comply with their financial duty to protect the tax payers money. For L & I to erroneously give away $450 million dollars and then not require its full return after the errors were discovered is not merely illegal. It is a serious breach of the public trust.
While there is a need for additional retro reform laws, there is also a need to enforce existing State laws. Unfortunately, the person most responsible for enforcing State Law (our State Attorney General) has a very close relationship with BIAW. It is likely that BIAW and affiliated PAC’s are our Attorney General’s largest campaign contributors.
So what is really needed is an enforcement system, a watch dog group, not subject to political influence. Only then can we be assured that the tax payer’s money will truly be protected.
