Introduced Version Senate Bill 4011 History

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Senate Bill No. 4011

(By Senators Tomblin, Mr. President, and Sprouse,

By Request of the Executive)


[Introduced September 7, 2005; referred to the Committee on the Judiciary; and then to the Committee on Finance.]


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:
§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.
§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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