Collapse of fund for injured workers is imminent, Koster warns

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Koster: the Second Injury Fund is broke and lawmakers may not have the stomach to fix it

Jason Noble. 6 minutes ago

JEFFERSON CITY | Missouri Attorney General Chris Koster warned lawmakers Monday that the imminent collapse of a fund for injured workers could cost the state or businesses hundreds of millions.

The Second Injury Fund will run out of money by the middle of the year, Koster said, and could finish 2011 with a negative balance of $20 million.

“Beginning in May, it goes into a death spiral,” Koster said of the fund, which pays claims for workers with pre-existing injuries who are injured again on the job.

The fund has flirted with insolvency since a cap on its revenues — which are paid by businesses and linked to workers compensation premiums — was instituted in 2005.

Presently, the attorney general’s office faces a backlog of some 27,000 Second Injury Fund cases that will have to be settled, likely at some expense to the fund.

On top of those are about 900 disabled individuals who currently receive bi-monthly checks from the fund and will continue to do so for the rest of their lives.

The fund’s obligations to those two groups alone could be more than $600 million, Koster said, and new claims are filed every day.

Once the fund runs out of money, both groups could sue the state, he said. A judgment in that case could saddle the state’s general revenue fund with the unfunded costs, or push those costs onto businesses in the state.

The purpose of Koster’s comments — offered in a letter to legislative leaders and in a House budget hearing at the Capitol on Monday — was to implore lawmakers to action.

And the actions necessary, he warned, will not be easy.

“The inactivity of the legislature on this issue since 2006 has created such a financial deficit that none of the proposed solutions on the table will actuarially come close to solving the problem,” Koster said. “In other words, the solution may be bigger than the building is willing to tolerate.”

House Speaker Steven Tilley largely confirmed Koster’s view.

Although lawmakers are searching for solutions, he said, increased taxes on businesses are definitely off the table. .

Moreover, Tilley said, all the legislative solutions under consideration would only apply to new Second Injury Fund cases, and would not address the fund’s current obligations.

“I’m not saying there’s a good solution anywhere,” he said. “I’m just saying I don’t think there the political will to say our fix is just to tax the employers more.”