Agency of Administration budget: workers' compensation premiums rise, deficit amortized over time

Nick Kramer, chief operating officer for the Agency of Administration, told the House Appropriations Committee on Jan. 27 that the agency’s central business unit is carrying multiple “orphaned” or miscellaneous budget items and that the FY27 presentation reflects that breadth.

“We've got lots going on,” Kramer said, noting the Financial Services Division consists of 10 people and is funded entirely by interdepartmental transfers. He described the agency's funding mix as roughly one-third general fund, one-third interdepartmental transfers (IDT) and one-third internal service funds (ISF), and said some small special funds — including a $125,000 clean-water allocation for stormwater municipal incentive payments — flow through his office when programs have no other home.

Kramer emphasized shifts in the agency’s internal insurance pools. “The premium collection is up, about 13.4%,” he said of workers’ compensation, and attributed the rise to higher claim costs on a small number of high-ticket claims rather than a large uptick in claim frequency. He added that general auto liability is up about 5% and that an “all other insurance” category is down about 18% (roughly $1.4 million), reflecting market volatility and the specifics of particular policies.

The agency also described an ongoing plan to reduce a negative fund balance in the workers’ compensation pool. Kramer said the fund has been in deficit for a couple of years and that, as presented, the balance has moved “from negative 3 and a half million to 2 and a half million,” adding that the FY27 budget is calculated to pay anticipated obligations, follow actuarial projections and partially amortize the deficit. He said the agency chose a multi-year amortization strategy — phased through premium rates — to avoid a single-year rate spike that would sharply increase charges to departments.

Kramer highlighted staffing changes tied to grant cycles: the removal of an ARPA-funded limited-service financial manager in the Recovery Office and the winding down of a limited-service position in the Office of Racial Equity previously tied to a Preschool Development Grant (PDG). He said the Office of Racial Equity has grown since its 2019 creation and now employs six positions, funded by a mix of general funds and HRISF resources.

On grants administration, Kramer described a summer of stakeholder convenings with external grant managers, regional planning commissions, the League of Cities and Towns, and nonprofits to solicit feedback on Bulletin 5 — the administrative bulletin governing state grant processes. He said a revision to Bulletin 5 will take effect July 1 and that the agency will convene quarterly with stakeholders to continue incremental improvements.

Kramer closed by offering to follow up on detailed points members raised, including requests for counts and the department-level impacts of insurance allocations. The presentation transitioned to the Department of Libraries.