Consumers will be harmed if Gov. Jeff Colyer wins a lawsuit over whether he can take $8 million this year from a state insurance fund, the Kansas insurance commissioner warns in a new court filing.
The commissioner, Ken Selzer, is running against Colyer in the Republican race for governor.
Selzer seeks a court order to block Colyer from transferring $8 million from an insurance-specific fund into a general fund that pays for the overall operation of state government.
“We don’t know why he did it. It doesn’t make any sense why he did it,” Selzer said in an interview Friday.
If the $8 million transfer proceeds, Selzer’s attorney said in a court filing, his department would be forced to collect additional fees on insurance companies to make up the lost revenue. But the filing also says the additional fees probably would be unconstitutional because they would be an unauthorized tax and that insurance companies would sue to stop them.
“Consumers will be harmed if insurance companies are forced to pass additional assessments on to them in increased premiums,” Selzer warns through an attorney in a court filing.
The court filing also says the transfer would create uncertainty in the insurance market because companies depend on the fee structure to build their business model.
But Colyer’s office said Selzer actually agreed to the transfers at a meeting with budget officials in the Brownback administration in late 2016. Shawn Sullivan, the state’s chief operating officer, said the transfers have taken place for several years.
“Ken agreed that the fund could be transferred to the state general fund,” Sullivan said, adding that the budget office agreed the transfers would stop after the 2018 and 2019 fiscal years.
“It was going to be transferred two more years, which would allow them to work on a plan for fees. That’s, to my recollection, what was agreed to at that time,” Sullivan said.
Bob Hanson, a spokesman for Selzer, said the department does not recall a meeting, “and certainly there was no formal agreement.” He said that in any case, the Legislature passed a law in May 2017 intended to prevent such sweeps of funds.
In an interview before Sullivan’s comments, Selzer said the lawsuit had nothing to do with the campaign.
“This is not a political issue. This is a protection-for-(the)-Kansas-insurance-consumer issue,” Selzer said.
The sweep would drastically reduce services provided by the Kansas Insurance Department, Selzer contends in a court filing. The Service Regulation Fund helps pay for salaries, contractual services and building maintenance at the agency that regulates insurance in the state.
The amount sought by Colyer represents nearly half of the fund’s value, according to court filings.
In 2017, lawmakers approved the transfer of $16 million from the Service Regulation Fund — $8 million in the 2018 fiscal year and $8 million in the 2019 fiscal year, which started July 1.
The fiscal year 2018 transfer already happened. Selzer is suing to prevent the fiscal year 2019 transfer from happening in full.
This spring, the Legislature eliminated the $8 million transfer for 2019. But Colyer line-item vetoed that when he signed the budget in May. Selzer said $2 million is being transferred out of the fund each quarter over the next year.
“The governor made it a political issue when he vetoed it” without approaching the Insurance Department first, Selzer said.
Colyer’s veto message didn’t explain the decision. Sullivan said the line-item veto was in line with the agreement that was made to sweep the fund for two years and then stop.
The lawsuit also comes amid the race to become the next insurance commissioner.
Assistant Insurance Commissioner Clark Shultz, who is running in the Republican primary, said he supported the lawsuit. Topeka Sen. Vicki Schmidt, who is also in the Republican race, said she voted against transferring the funds as a member of the budget committee.
Democratic candidate Nathaniel McLaughlin said he supported the lawsuit as well.
The Kansas Association of Insurance Agents didn’t respond to a request for comment on Friday.