Legislative Post Auditor Campbell Malone on Wednesday slammed a proposal offered by Sen. David Jones that would use monies from the Insurance Guaranty Fund to fund step increases for teachers.
The Jones proposal was one of four brought by senators to resolve the impasse between the American Federation of Teachers union and the V.I. government which led to a territory-wide strike Wednesday. It would lower the cap on the fund and move the surplus into a new step increase fund.
In a summary circulated during the second day of meetings between senators, the governor and the administration's fiscal team, Malone said the Jones bill "fails miserably to carry the burden of financing the problems" facing the administration. He recommended that it be rejected.
The Insurance Guaranty Fund is a safety net for insurance policyholders who could otherwise be left without coverage if their insurance company fails for any reason. If the fund is not large enough to cover claims if a company defaults, then other local insurance companies must kick in more. Financed largely by a 5 percent tax on insurance premiums, the fund grows by about $14 million a year.
Malone submitted a 12-page report that also assailed the administration for having a Senate staff member analyze legislation under consideration by the administration. Malone said any feasible solution to the impending labor unrest must generate $40 million and be recurring on an annual basis. He said Jones' bill is flawed in two instances:
– If the cap on the Insurance Guaranty Fund is lowered to $40 million, only $8 million can be generated from anticipated revenue;
– If the cap is not lowered and is allowed to remain at its current $50 million level, the fund would contain a shortfall of more than $1 million, and thus "no revenue can be generated from this source."
Malone estimated the present balance of the IGF as $36.4 million.
Malone's recommendations echoed those offered by the Turnbull administration's financial consultants, First Union Securities Inc., which concluded it would be fiscally irresponsible to implement the Jones plan.
According to First Union, "Based on credit reports provided by the major rating agencies, the overall health of the property and casualty insurers has not improved significantly since the IGF was established five years ago. … As a result, we do not believe that it would be prudent at this time to reduce the capitalization of this fund."
The Jones proposal was characterized by First Union as a one-time source of revenue and not a long-term solution. "We do not believe that it is fiscally responsible for the government to pursue this proposal aside from the fact that it may not be feasible," the consultants concluded.
