Labor Department asks House finance subcommittee for $1.4 million to stabilize workers’ compensation operations

Kathy Munoz, commissioner of the Alaska Department of Labor and Workforce Development, told the House Finance Department of Labor and Workforce Development Subcommittee on Jan. 28 that the department is seeking a one-time $1.4 million UGF appropriation for fiscal year 2027 to maintain workers’ compensation operations.

“Historically that [WSCA] has funded 99% of operations for workers’ compensation,” Munoz said, describing how employers’ premiums feed the Workers’ Safety and Compensation Account (WSCA). She told the subcommittee that the fund was partially swept in a recent session and not fully restored, leaving a budget hole the department would like to address with the one-time request.

Administrative Services Director Dan DeBartolo told members the workers’ compensation division is operating with about 30% vacancy and faces higher personnel and contractual costs after a classification study and salary adjustments. He said the department considered asking for the entire swept amount (about $2.2 million) but instead proposed $1.4 million based on projected FY27 costs.

DeBartolo described several drivers of the shortfall: lower premium receipts due to safety improvements that have reduced employer premiums over the past decade, costs from a classification study to better pay hearing officers and contractual salary increases, and the late‑session sweep of WSCA funds.

“Over the last 10 years, Alaska has become safer. We have lowered our premiums to employers, and hence, we have lowered the revenue coming in,” DeBartolo said, adding that those positive safety trends have a fiscal impact on the revenue stream that supports WSCA-funded operations.

Members asked for clarification about why accounts were sweepable. DeBartolo explained that sweepability is decided via executive-branch budget practice (including the Department of Law and Office of Management and Budget) and that, without explicit statutory protection, accounts can be swept back to the Constitutional Budget Reserve (CBR). He said changing sweepability requires legislative action.

The presentation noted that the workers’ compensation medical services review committee has helped lower system costs and that premium costs in Alaska are down about 38% since 2008, but that operational capacity remains constrained by vacancies and a funding shortfall.

The subcommittee did not take a formal vote during the Jan. 28 meeting; staff said they expect further focused discussions during the subcommittee’s upcoming sessions and will follow up on implementation details and any potential statutory changes.