Reviewers flag drafting, tax and pension questions as supporters pitch $150 million separation payment for Pinnacle Assurance

Legislative Council staff and the Office of Legislative Legal Services reviewed a proposed 2026 ballot initiative that would convert Pinnacle Assurance from a state political subdivision into an independent mutual insurance company, require a one‑time $150,000,000 separation payment to the state, direct premium taxes after separation to a new Skilled Workers and Trades Fund, and charge the insurance commissioner with implementing a risk plan and transition steps.

The review meeting on January 26 was procedural but detailed: staff alternated questions and asked the proposal’s designated representatives and proponents to clarify drafting, constitutional, and implementation issues. "We hereby submit our comments and questions to you regarding the appended proposed initiative," Erin Reynolds, representing Legislative Council Staff, said as the hearing began. Proponents and their counsel said they would accept many of the suggested drafting changes and clarifications.

Why it matters: The measure links revenue from a state asset to workforce training and would change how a long‑standing state insurer is governed and financed. Staff repeatedly asked whether language is clear enough to (1) preserve the state's and Pinnacle's enforcement rights while barring third‑party suits, (2) limit whether the one‑time payment is exempt from TABOR's revenue limits, (3) define the timing for premium taxes, and (4) govern the termination of Pinnacle’s affiliation with the Public Employees Retirement Association (PERA).

Key facts and staff concerns

- Separation payment and taxes: The initiative requires a one‑time $150,000,000 payment to the state and directs premium taxes paid by Pinnacle after separation (on or after 07/01/2027) into the Skilled Workers and Trades Fund. Staff asked that subsection language explicitly limit any TABOR exemption to the single $150,000,000 payment (not ongoing premium taxes); proponents agreed to change the drafting from plural 'payments' to singular 'payment' to reflect that intent.

- Rationale for $150M: Staff noted that a 2021 bill had proposed a $305,000,000 separation payment. A proponent representative said the $150,000,000 figure reflects an "approximately $80,000,000 adjusted surplus transferred from the state to Pinnacle previously, which has been adjusted for inflation," and that Pinnacle will also make a separate termination payment to PERA—together making the full cost of separation higher than $150 million. Proponents said a larger one‑time charge could imperil Pinnacle's ability to operate after separation.

- TABOR and fund deposit mechanics: Staff recommended adding explicit language (for example, a 'notwithstanding §10‑3‑209(4)' clause) so premium taxes credited to the Skilled Workers and Trades Fund are not treated as general‑fund revenue under existing statute; proponents said they will consider adding the suggested wording.

- Timing of premium tax liability: Staff asked whether premium taxes credited to the fund beginning 07/01/2027 would be assessed on 2026 premiums; proponents clarified that premium taxes would only accrue after Pinnacle separates, not retroactively, and agreed to add clarifying language.

- PERA termination and employee protections: The initiative would terminate Pinnacle’s affiliation with PERA effective 06/30/2027 and require a reserve payment to PERA calculated under existing PERA valuation procedures. Staff pressed whether statutory PERA procedures (including employee votes and PERA's authority to deny termination if it threatens actuarial soundness) would apply; proponents said they intend reserve calculations to follow current PERA valuation rules, that Pinnacle would pay PERA’s application costs from its own reserves, and that statutory mechanics for termination would be respected although termination is expected by the stated date.

- Third‑party claims and enforcement: Several subsections use prohibitory phrasing (e.g., 'no person shall have any claim...') that staff warned can be ambiguous. Proponents said the intent is to bar third‑party suits (such as taxpayer claims) concerning the separation while preserving enforcement rights between Pinnacle and the state and allowing the commissioner and state to seek remedies if required; they will rework the language for clarity.

- Commissioner's role and risk plan: The measure directs the commissioner of insurance to "facilitate and support" separation and to develop an insurer‑of‑last‑resort risk plan for employers unable to procure coverage. Staff asked whether there should be an explicit deadline and who pays for implementation: proponents said administrative costs to prepare the risk plan would be a General Assembly decision, there is no explicit statutory deadline but an implicit timeline exists because Pinnacle would cease serving as insurer of last resort on 06/01/2028, and that they will consider adding explicit deadlines and rulemaking authority language for the commissioner.

- Skilled Workers and Trades Fund governance and appropriations: Staff and proponents discussed moving anti‑sweep/inviolate language from the declaration to the fund creation section, whether the fund should be continuously appropriated (proponents intend continuous appropriation), how to define part‑11 terms, board composition (public members limited by congressional district), reporting and distribution of an annual report, administrative expenditure caps (staff suggested consolidating or expanding caps), and annual audits by the state auditor.

What proponents said: In closing, a proponent thanked staff for their memo and review. Proponent counsel emphasized the goal of funding job training that will reduce workplace injuries and workers' compensation costs and that many drafting issues can be fixed before a final ballot form is set.

Next steps: This was a review‑and‑comment session; staff identified technical and substantive drafting issues and the proponents repeatedly agreed to consider and implement clarifying edits (e.g., limiting TABOR exemption language, clarifying premium tax timing, refining third‑party claim bars, and conforming cross‑statutory references). The measure would still require legislative and administrative follow‑up to implement the risk plan and to finish conforming statutory edits if it proceeds to the ballot.