Insurance Departments Feel Pain Of Their States Budget Crunches
The fiscal pain that governors say their states will experience in the coming year is rippling through state insurance departments throughout the country.
That pain is reflected in actions ranging from restrictions on travel to hiring freezes and is likely to be felt into the forseeable future, according to interviews with National Underwriter.
The potential impact on the ability to properly regulate insurance issues surfaced during a recent discussion of a proposed model annuity nonforfeiture regulation that is being fast tracked.
During that discussion, regulators were left wondering whether travel restrictions would leave enough regulators present for a quorum on the issue when they meet this week for the spring meeting of the National Association of Insurance Commissioners in Atlanta. The ability to have a quorum and take a vote may depend on whether one regulator is able to fly into Atlanta on time to make that particular session.
With the exception of New York, all states contacted by NU cited belt tightening.
And for good reason, according to the National Governors Association, which says states will have budget shortfalls of more than $80 billion in fiscal year 2004.
In Illinois, for example, the insurance department along with other state agencies, is awaiting word from Governor Rod Blagojevich on what budget actions need to be taken, says Arnold Dutcher, the departments acting director.
On Feb. 24, the governor called for agency and department budget cuts averaging 10% to help plug a state budget deficit of nearly $5 billion.
“We dont know how it will apply to our budget,” or if there will be changes to the departments budget submission for the coming fiscal year, Dutcher adds.
The departments current budget is $43.9 million, raised from dedicated funds from fees and charges paid by insurers and producers.
Dutcher says the department has already taken action to limit expenses and is part of a statewide governmental hiring freeze. The department is allotted 413 employees and currently there are 83 vacancies that cannot be filled, he says. Attrition and an early retirement program created 53 of those 83 vacancies.
Texas state agencies have received a similar cost-cutting directive from Gov. Rick Perry who announced 2003 reductions of agencies appropriations averaging 9%.
Although maintenance taxes are used to fund the Texas insurance department, Lee Jones, a spokesperson, says there have been cutbacks on travel and hiring. For instance, vacant positions for financial analysts and attorneys have been removed from the job board, he says.
The budget appropriation for fiscal year 2003 is $52.8 million and with cuts of $3.6 million, the department has agreed not to spend more than $49.2 million, he adds.
The Connecticut departments $21 million budget is funded through premium taxes and not through a general state fund, says a spokesperson. Even so, it lost 15 people within the last month, she says.