Senate Bill No. 4011
(By Senators Tomblin, Mr. President, and Sprouse,
By Request of the Executive)
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[Introduced September 7, 2005; referred to the Committee on the
Judiciary; and then to the Committee on Finance.]
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A BILL to amend and reenact §23-2C-1 of the Code of West Virginia,
1931, as amended; to amend said code by adding thereto a new
section, designated §23-2C-24; and to amend and reenact §23-
2D-4 of said code, all relating generally to workers'
compensation; making an additional finding; allowing use of
surplus note or other loan arrangement for transfers from the
New Fund to the successor to the Workers' Compensation
Commission; allowing additional flexibility in terms and
method for issuance of workers' compensation debt reduction
revenue bonds; and allowing use of derivative products to
reduce debt service costs and manage interest rate exposure.
Be it enacted by the Legislature of West Virginia:
That §23-2C-1 of the Code of West Virginia, 1931, as amended,
be amended and reenacted; that said code be amended by adding
thereto a new section, designated §23-2C-24; and that §23-2D-4 of said code be amended and reenacted, all to read as follows:
ARTICLE 2C. EMPLOYERS' MUTUAL INSURANCE COMPANY.
§23-2C-1. Findings and purpose.
(a) The Legislature finds that:
(1) There is a long-term actuarial funding crisis in the
state-run monopolistic Workers' Compensation System;
(2) Similar short-term and long-term crises have been ongoing
during the past two decades;
(3) During the current crisis, employers in West Virginia find
it increasingly difficult to afford the rates charged by the
Workers' Compensation Commission for workers' compensation coverage
and that paying said rates adversely impacts employers' ability to
compete in a global economic environment;
(4) The cost of obtaining Workers' Compensation coverage from
the state system may result in many employers leaving the state;
(5) Employers' access to competitive Workers' Compensation
rates and the resulting economic development benefit is of utmost
importance to the citizens of West Virginia;
(6) A mechanism is needed to provide an enduring solution to
this recurring Workers' Compensation crisis;
(7) An employers' mutual insurance company or a similar entity
has proven to be a successful mechanism in other states for helping
employers secure insurance and for stabilizing the insurance
market;
(8) There is a substantial public interest in creating a
method to provide a stable Workers' Compensation insurance market
in this state;
(9) The state-run Workers' Compensation Program is a
substantial actual and potential liability to the state;
(10) There is substantial public benefit in transferring
certain actual and potential future liability of the state to the
private sector and creating a stable self-sufficient entity which
will be a potential source of Workers' Compensation coverage for
employers in this state;
(11) A stable, financially viable insurer in the private
sector will aid in providing a continuing source of insurance funds
to compensate injured workers; and
(12) Because the public will greatly benefit from the
formation of an employers' mutual insurance company, state efforts
to encourage and support the formation of such an entity, including
providing funding for the entity's initial capital,
a portion of
which may be subject to a surplus note or other low-interest loan
obligation, is in the clear public interest.
(b) The purpose of this article is to create a mechanism for
the formation of an employers' mutual insurance company that will
provide:
(1) A means for employers to obtain Workers' Compensation
insurance that is reasonably available and affordable; and
(2) Compensation to employees of mutual policyholders who
suffer work place injuries as defined in chapter twenty-three of
this code.
§23-2C-24. Surplus note or other loan arrangement for new fund.
(a) The Governor, in issuing a proclamation pursuant to
section eleven of this article, shall specify the portion of the
funds transferring to the company in the New Fund that shall be
subject to terms of a surplus note or other loan arrangement. The
terms of any such surplus note or other loan arrangement must be
approved by the Insurance Commissioner before execution of the said
proclamation.
(b) Payments received by the Treasurer from the company in
repayment of any outstanding surplus note or other loan arrangement
made pursuant to this subsection shall be transferred to the
Insurance Commissioner for disbursement to the Old Fund.
(c) The Insurance Commissioner may enter into such agreements,
including loan arrangements, with the company that are necessary to
accomplish the transfers addressed in this article.
ARTICLE 2D. Workers' Compensation DEBT REDUCTION BONDS.
§23-2D-4. Workers' Compensation debt reduction revenue bonds;
amount; when may issue.
(a) Revenue bonds of the State of West Virginia are hereby
authorized to be issued and sold by the West Virginia Economic
Development Authority created and provided in article fifteen, chapter thirty-one of this code, solely for the paying down and
elimination of the current unfunded liability of the Workers'
Compensation Fund, as provided by the Constitution and the
provisions of this article. The principal of, and the interest and
redemption premium, if any, on the bonds shall be payable solely
from the special fund provided in section six of this article for
repayment.
(b) The bonds shall bear such date or dates and mature at such
time or times, be in such amounts, be in such denominations, be in
such registered form, carry such registration privileges, be due
and payable at such time or times, not exceeding thirty years from
their respective dates, and place and in such amounts, and subject
to such terms of redemption as the resolution may provide The West
Virginia Economic Development Authority either in the resolution
authorizing the issuance of the bonds or by the execution and
delivery by the West Virginia Economic Development Authority of a
trust indenture or agreement, shall stipulate the form of the
bonds, whether the bonds are to be issued in one or more series,
the date or dates of issue, the time or times of maturity, the rate
or rates of interest payable on the bonds, which may be at fixed
rates or variable rates and which interest may be current interest
or may accrue, the denomination or denominations in which the bonds
are issued, the conversion or registration privileges applicable to
some or all of the bonds, the sources and medium of payment and place or places of payment, the terms of redemption, any privileges
of exchangeability or interchangeability applicable to the bonds,
and the entitlement of holders of the bonds and the providers of
any agreements provided in subsection (e) of this section to
priorities of payment or security in the amounts deposited in the
West Virginia Workers' Compensation Debt Reduction Revenue Bond
Debt Service Fund
: Provided, That in no event may the amount of
bonds issued pursuant to this article exceed one billion five
hundred million dollars: Provided, however, That the terms of the
bonds shall not exceed thirty years from their respective issuance
dates.
(c) Revenue bonds issued under this article shall state on
their face that the bonds do not constitute a debt of the State of
West Virginia; that payment of the bonds, interest and charges
thereon cannot become an obligation of the State of West Virginia;
and that the bondholders' remedies are limited in all respects to
the "special revenue fund" established in this article for the
liquidation of the bonds.
(d) Net proceeds from sale of these bonds shall be deposited
in the Old Fund.
(e) In addition and not in limitation to the other provisions
of this section, in connection with any bonds issued or expected to
be issued pursuant to this article, the West Virginia Economic
Development Authority may enter into: (i) Commitments to purchase or sell bonds and bond purchase or sale agreements; (ii) agreements
providing for credit enhancement or liquidity, including revolving
credit agreements, agreements establishing lines of credit or
letters of credit, insurance contracts, surety bonds and
reimbursement agreements; (iii) agreements to manage interest rate
exposure and tax risk and the return on investments, including
interest rate exchange agreements, interest rate cap, collar,
corridor, ceiling and floor agreements, option, rate spread or
similar exposure agreements, float agreements and forward
agreements; (iv) stock exchange listing agreements; and (v) any
other commitments, contracts or agreements approved by the West
Virginia Economic Development Authority: Provided, That the
provider or providers of any of the agreements set forth above may
be granted the same security and lien privileges as the bondholders
and upon execution of such agreements will constitute a contract
between the West Virginia Economic Development Authority and the
provider or providers.
NOTE: The purpose of this bill is clarify that a flexible
funding mechanism is available to ensure that the company will have
sufficient assets to successfully provide Workers' Compensation
insurance while at the same time maximizing the amount of moneys
ultimately available to satisfy the unfunded liabilities of the Old
Fund. This bill also relates to the issuance of Workers'
Compensation Debt Reduction Revenue Bonds to provide additional
flexibility to obtain the best bond sale possible. The legislation
also provides for the use of derivative products to reduce debt
service costs and manage interest rate exposure.
Strike-throughs indicate language that would be stricken from the present law, underscoring indicates new language that would be
added
§23-2C-24 is new, therefore, strike-throughs and underscoring
have been omitted.
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