Missouri Attorney General Chris Koster warned lawmakers Monday that a state fund for injured workers could be permanently insolvent in months.
The state's Second Injury Fund takes businesses off the hook for paying the claims of workers with previous injuries or conditions who are re-injured on the job. Analysts have warned for years that the fund was running out of money.
Koster, who testified in front of a House committee, said the fund could become temporarily insolvent next month, then briefly recover before entering a "death spiral" and becoming permanently insolvent around the midpoint of this year. By the end of 2011, the Second Injury Fund could be nearly $20 million in debt, Koster said.
Last month, Koster sent lawmakers a memo warning that the fund was likely to run out of money this year. He said the Legislature should either scrap the fund or fix it by controlling costs or increasing its revenues. The attorney general sent lawmakers another letter Monday, in which he urged quick action to address the Second Injury Fund. Koster said there are 27,000 claims pending against the fund.
"Only the General Assembly can offer a solution to this problem, and only three months remain to find that solution," Koster said in his most recent letter.
If the Second Injury Fund becomes insolvent, Koster said it would be impossible to fully pay the claims of people who receive lump sum payments for permanent partial disabilities and the claims of people who receive regular payments for permanent total disability claims. Plus, Koster said, the 39 attorneys and staff members in his office who defend the Second Injury Fund against claims - and whose salaries are paid for by the fund - would be laid off.
Koster said the insolvency of the fund also would likely result in a federal lawsuit. He said that could force state government or Missouri businesses to face millions of dollars in claims.
The Second Injury Fund is financed from a surcharge employers pay on their workers' compensation insurance. That surcharge was capped at 3 percent under a 2005 law. Previously, the fee increased and decreased based on a formula created by the state Department of Labor and Industrial Relations.
Numerous lawmakers and businesses groups have said that they do not want to increase the surcharge.