Senate advances changes to workers’ compensation fund governance, prompting debate over liability and oversight

Senate Bill 3, a package of amendments altering the structure and liability rules of the state workers’ compensation fund, was debated extensively on the Senate floor, with sponsor Senator K. S. Cornaby saying the changes are intended to improve the fund’s viability and allow directors to obtain directors-and-officers (D&O) insurance.

“The bill then modifies the scope of liability for the directors of the fund to bring it in line with the national scope for directors of similar funds, which will enable them to obtain the proper levels of D and O insurance,” Cornaby said in summarizing the bill on the floor. He told senators the measure includes technical changes to board selection, meeting rules and audits and that the amendments adopted in committee remain in the bill.

Opponents and questioners pressed whether the bill would reduce the state’s responsibility to injured workers and whether moving certain functions outside ordinary state risk-management arrangements would leave gaps in oversight. Senator Swan said he was concerned that, if the fund’s governance changed, ‘‘I would hope that the state is not looking to avoid that responsibility of making that commitment to the injured individuals.’’

Cornaby replied that the bill is focused on providing insurance protection for individuals who serve voluntarily and that the fund itself remains responsible for claims. “What we’re trying to do is provide an insurance pool ... so that those workers are not left hanging,” he said.

Senators also discussed previous salary and personnel questions tied to entities spun off from state administration. Cornaby said a salary survey and an audit by the legislative auditor general are planned to address concerns about prior increases and administrative decisions; he said the survey results would be available before the session ends.

Supporters argued the changes would make the fund financially sound and allow the board to attract qualified managers. Detractors urged caution and the completion of further study, especially on oversight and possible privatization risks. Senator Barton and others cited the retirement fund experience and warned against losing state oversight.

The floor record shows the sponsor repeatedly emphasized that the state auditor and other audit mechanisms remain authorized and that the fund is expected to remain solvent while having more flexible procurement of appropriate D&O coverage. At the close of remarks the bill was placed on the third-reading calendar for later action; the transcript records the lengthy debate and multiple requests for clarifying audits and data.