Governor's workers' compensation plan heard in Assembly

CARSON CITY - Gov. Kenny Guinn's plan to privatize a state-run workers' compensation system is being defended as the only way to get Nevada out from under a $1.6 billion liability from anticipated future payments to injured workers.

But members of the Assembly Commerce and Labor Committee questioned the legality and the ethics of approving SB37, privatizing the Employers Insurance Company of Nevada.

Guinn's chief-of-staff Pete Ernaut countered at a committee hearing Monday that it would be a gamble for lawmakers not to approve the privatization plan, SB37.

"This is an opportunity to take a $1.6 billion liability off the state's books," Ernaut added.

The measure would make EICON, the current monopoly that operates the workers' compensation system, a private firm that can better compete with existing private insurance companies, Guinn says. Competition for the workers' compensation business will begin July 1.

"Let's not kid ourselves. The day this market opens to competition, there's going to be businesses standing in line to stand in line to leave this system," Ernaut said.

Once the market opens, all the players will compete for $440 million a year in premium income. The state's share has amounted to $385 million in premiums from 46,000 employers. The rest goes to self-insured programs.

As many as 600 employees are expected to be laid off as the EICON loses business as a result of competition mandated by the 1995 Legislature. But Ernaut said SB37 provides a generous package to assist state employees who lose their jobs to find other work.

Sen. Joe Neal, D-North Las Vegas, called those provisions of SB37 a "political ploy to get this body to vote yes on the bill." He said the governor could lift the hiring freeze at any time, without putting it in legislation.

Not all lawmakers were convinced that a public company is doomed to fail in an open market. Assemblyman David Goldwater, D-Las Vegas, said a public entity has the advantage of not paying corporate income taxes.

Nevada businesses also have the security of knowing their insurance company can't leave the state, he added.

"For all the authority the insurance commissioner has, she can't make a private company stay in Nevada," Goldwater said, adding that other states, such as Rhode Island, tried privatization, and then went back to the state-run system.

Labor groups, including the State of Nevada Employees Association and the Nevada State AFL-CIO, oppose the bill. Those groups wants the state insurance company to remain part of state government, maintaining state protections to those employees who keep their jobs.

Danny Thompson, representing the AFL-CIO, said the bill raises more questions than it answers.

Thompson and other Nevada labor leaders also say Guinn's plan to privatize EICON amounts to an unconstitutional sellout of public assets.

Ernaut produced a letter from the Legislative Counsel Bureau stating that the deal is constitutional. EICON's assets are owned by the premium payers, not the state, Ernaut added.

He also stressed that the governor is ready to discuss restoring benefits cut several years ago to shore up the nearly bankrupt system in the early 1990s.

A work session is scheduled for later in the week.

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