From Deseret News archives:

A $50 million blunder? State misses chance to get workers comp money

Published: Wednesday, Aug. 24, 2005 12:09 p.m. MDT
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Utah taxpayers lost $50 million Tuesday.

No, the Tax Commission didn't drop a big bag of cash out the back of a truck.

And no one made off with the Governor's Mansion.

Instead, the Utah Supreme Court ruled that the state has no ownership in the Workers Compensation Fund.

"This was a $50 million fiasco," said Sen. Curt Bramble, R-Provo, when informed of the high court's decision.

"We're delighted with this opinion," said Lane Summerhays, president and CEO of the WCF. "True, that $50 million was on the table. And it's not there now."

In the 2003 Legislature, Bramble, after being asked by then-Gov. Mike Leavitt to look at the fund's operations, tried to get Leavitt and the Legislature to "make a deal" with the WCF: Sell any perceived ownership in the fund for $50 million. But his bill went nowhere. He tried again, but failed, in 2004.

"This was a check in our hands," Bramble said Tuesday.

"It seemed to me a really win-win proposition. The state got $50 million; the fund clarified its position" by all agreeing the state had no ownership in the operation, he added.

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The fund was originally set up by the state back in 1917 as an "insurer of last resort" for private and public entities that couldn't get injured worker insurance elsewhere. The fund, which now has 30,000 clients, makes payments to workers hurt on the job. But over the years the state had separated itself from the fund through a series of legislative and administrative actions.

Still, the "quasi-governmental" veil hung over the fund. Idaho insurance regulators said their own laws prohibited operations by any insurance firm in Idaho owned by another state, and the WCF's Advantage subsidiary was doing good business there. Some Utah competitors also claimed that WCF's non-tax status was an unfair advantage.

To clear up all legal issues and separate the fund from all state ties, the WCF, which always believed the state had no direct ownership other than being a policyholder, offered the $50 million "buy-out," Bramble said.

But Leavitt, a number of legislators and others balked in 2003.

Some, including Dane Leavitt, Mike Leavitt's brother and head of the Leavitt family insurance empire (which the governor ran before winning office in 1992), believed the state's interest in the huge fund was a lot more than $50 million. Maybe it was as much as $300 million, the money in the fund above what was needed to pay anticipated worker claims.

Fearing a political backlash if it proved out that the state had sold on the cheap, legislators opted for more time. An exhaustive study of the fund ensued, and the WCF sued the state.

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