HELENA — Business groups and others denounced one of Gov. Steve Bullock’s key revenue-raising proposals as risky and discriminatory at a hearing at the special legislative session on Monday.
Bullock’s plan would temporarily require the workers’ compensation State Fund to pay a 3 percent management fee on its assets exceeding $1 billion that are invested by the State Board of Investments. The bill, if enacted, is projected to raise $30 million over the two-year period before the fee goes off the books in June 2019.
Senate Bill 4, by Sen. Ed Buttrey, R-Great Falls, ran into a buzz saw of opposition from the State Fund, the state insurance commissioner’s office and various business groups. The Bullock administration and representatives of some union and senior groups supported it as a way to reduce the impact of potential budget cuts.
The joint Senate and House business committees took no immediate action on Buttrey’s bill.
It also didn’t vote immediately on SB5, by Sen. Steve Fitzpatrick, R-Great Falls, that calls for temporarily putting certain new liquor licenses up for an auction rather than a lottery. No one opposed Fitzpatrick’s bill, which drew support from the Revenue Department, Montana Tavern Association, Gaming Industry Association, Montana AFL-CIO and other unions and the AARP Montana. It would raise $6.3 million over the next two years.
These two bills are part of the Democratic governor’s plan to address a $227 million budget and revenue shortfall. He is seeking to raise one-third by budget cuts, one-third by fund transfers and one-third by tax increases. The $30 million that Buttrey’s bill would raise would be part of the $75 million in proposed revenue increases.
Buttrey’s bill on the temporary fee on certain State Fund assets drew most of the discussion.
“The bottom line is, it is not a new tax on state business,” Buttrey said, calling it “a short-term solution.”
It wouldn’t cut the State Fund surplus, he said, but would reduce the increase in the value of State Fund equity funds.
The bill specifically prohibits this management fee from being passed onto State Fund policyholders, Buttrey said, and it would not be imposed on pension funds for public employees and teachers, whose funds are also invested by the Board of Investments.
Ali Bovingdon, Bullock’s deputy chief of staff, countered charges that the bill was discriminatory, noting that the Montana Supreme Court has ruled that all that is needed is to provide a rational basis for the fee, which the administration has done.
Kathy Bramer of AARP Montana supported SB4 and the revenue it would raise, saying, “We’re very concerned about the impact of this budget cut on seniors.”
Other supporters of the bill, including representatives of unions, said its passage would provide much-needed temporary revenue to help close the budget gap and limit harmful budget cuts.
However, Bob Biskupiak, deputy insurance commissioner under Republican state Auditor Matt Rosendale, blasted Buttrey’s bill.
“It’s just plain wrong,” Biskupiak said. “Where did this money come from? It came from the policyholders and it should stay with the policyholders.”
Kevin Braun, chief counsel for the State Fund, said its assets are invested conservatively, currently earning a rate of return of 2.62 percent, which is less than the proposed 3 percent fee.
He cited several external actuaries for the State Fund who concluded the State Fund’s reserves are “reasonable and appropriate.”
“Our surplus is not out of line and not excessive,” Braun said. “We don’t take a profit and return the excess in the form of dividends. Our rates have not gone up in the last 10 years. They’ve gone down.”
Rep. Greg Hertz, R-Polson, whose business is insured by the State Fund, opposed the bill, saying, “It’s a 3 percent tax. It’s not a management fee. The money belongs to the shareholders.”
He asked why only the State Fund and its policyholders would be hit with the proposed management fees, and not the other work-comp insurers.
Barry “Spook” Stang of the Montana Motor Carriers Association and a former legislator, said he’s seen the detrimental consequences when the Legislature “dabbles” with the State Fund in search of state revenue,
Other opponents included representatives of the Montana Chamber of Commerce, the National Federation of Independent Business, Montana Building Association and the Montana Logging Association.