Senate panel approves amended bill to strengthen municipal risk-pool reserves and reporting

The Senate Finance Committee on Oct. 27, 2025, approved an amended version of Senate Bill 297 aimed at increasing financial stability and transparency for municipal risk pools, the committee announced during an executive session.

The bill, as amended and approved by the committee, sets minimum reserve bands for pooled risk programs and creates a capital-reserve mechanism that allows political subdivisions to deposit surplus funds into a non‑lapsing account for future assessments or contribution holidays. "We have worked on several different amendments that are before you," David Lang, chief of staff for the secretary of state, told the committee as he summarized the package of changes.

Committee members and agency staff said the changes were intended to give local governments more predictability and time to respond if a pool's contingency reserves decline. Under the amendment, pools must notify their members if contingency reserves fall to 8% or less; a more urgent notice to the Secretary of State is required if reserves drop to 4% or less. The amendment also establishes a framework allowing political subdivisions to build a capital reserve over multiple years to meet a 4% target without disrupting annual operating budgets.

Why it matters: Municipal risk pools insure or partially insure liabilities for towns, cities and other political subdivisions. Committee members said the amendment seeks to reduce the likelihood that a pool would reach insolvency mid‑contract year and force sudden assessments that local budgets cannot absorb. "This amendment further clarifies and put some more structure into the insolvency and financial impairment," Lang said.

Key provisions and committee discussion

- Notification triggers and timing: If a risk pool's contingency reserve drops to 8% or less, the pool must notify participating political subdivisions within the timelines set in the amendment. If the contingency reserve reaches 4%, the pool must notify the Secretary of State within five business days.

- Capital reserve account: The bill creates a non‑lapsing capital reserve that political subdivisions may hold and control to smooth out contributions over time. For pools above certain health thresholds, political subdivisions would be able to contribute 1% of budgeted amounts per year up to a 4% target, with the statutory language stopping contributions once the target is reached.

- Reserve bands and review: The amendment keeps a target band for contingency reserves in statute (previously discussed at 12–16%) and directs the Secretary of State to convene a review with interested parties after two years — and then every four years thereafter — to consider whether those bands remain appropriate.

- Use of surplus: The bill allows surplus funds to be deposited into the non‑lapsing capital reserve to be used for contribution holidays or other locally negotiated approaches (for example, discussions tied to collective bargaining), rather than forcing immediate adjustments to operating budgets.

Supporters said the two‑tiered approach — strengthening pool-level contingency targets while creating municipal-level capital reserves — should create a larger effective buffer for local governments. Senator Waters called the compromise "a two‑fold approach" that provides both stability and guardrails for risk‑pool management.

Concerns and clarifications

Some members raised questions about how the change would interact with collective bargaining and whether unions or employees might see benefit reductions. Committee members and staff clarified that employer–union benefit decisions remain between those parties, but the capital reserve could provide municipalities with a funding avenue to maintain negotiated benefits in a downturn.

Senator Rosenwald queried why a pool's fiscal note might shrink after consultations with agency staff; David Lang and other staff said early fiscal estimates were conservative and that agencies, after additional review, believed they could comply within existing administrative structures, though they might need to request appropriations during the regular budget process if additional funds were required.

Committee action and next steps

The committee voted to adopt the committee amendment (amendment 0894) and then approved the bill as amended. The amendment passed on voice vote with "the ayes have it," and the bill passed as amended and was placed on the consent calendar.

"By putting that money in there, if there is an assessment, then they have the money," David Lang said when describing the intended effect of combining pool and municipal reserves.

The bill includes a statutory review requirement to evaluate the reserve bands and implementation after two years and again every four years, providing periodic legislative oversight and a checkpoint to adjust policy if the bands prove too low or too high.

Ending note

Committee leaders said they will monitor implementation and the periodic reviews required in the statute; staff and agencies noted any funding needs to administer changes would be raised in the regular budget process. The bill moves next according to the legislature's consent and floor procedures.