nysif-1166065Noting that New Yorkers had been treated last week to “almost daily political perp walks” involving “a parade of office-holders,” an editorial in Saturday’s Wall Street Journal pointed out: “The bigger scandal in the Empire State continues to be what the politicians do that’s legal.”

Case in point: the new state budget’s diversion of $1.75 billion in technically excess reserves from the State Insurance Fund (SIF), the off-budget, non-profit, government-owned carrier that now covers nearly 40 percent of the New York market for workers’ compensation insurance. The Journal noted (alas, behind its online paywall):

Note: These reserves [being shifted to the state budget] are merely an accounting charade concocted by Albany. The state has hitherto required policyholders to pre-fund liabilities for “second injuries,” which workers re-aggravate on the job. By eliminating this requirement, lawmakers have created a $1.75 billion reserve that they can now tap to finance their sundry desires. Mr. Cuomo calls this reform.

Lawmakers claim no-harm-no-foul since many employers prefer to pay second injury claims as they are filed rather than pre-fund the liabilities. But then why not return the “reserves” to policyholders or use them to reduce future premiums? Or let the insurer keep the cash for a rainy day, which may be more imminent than they expect.

The Journal’s criticism echoes what I had written here, and here.

By the way, New York’s workers’ compensation premiums — a key cost of doing business — were ranked fifth highest in the country last year, 150 percent of the median for all states in a study conducted by the Oregon Department of Consumer and Business Services. Financially weakening SIF certainly won’t promote comparatively lower rates in the future.

About the Author

E.J. McMahon

Edmund J. McMahon is Empire Center's founder and a senior fellow.

Read more by E.J. McMahon

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