Red ink leads to state probe of school insurance
By Joseph Ryan and Diane Rado, Chicago Tribune | |
McClatchy-Tribune Information Services |
The regulators showed up at the high-rise
The standoff has snowballed into a legal fight with the state. Meanwhile, school districts now find themselves on the hook for about
Close to 200 districts are in the pool to help cover claims for school employees hurt on the job. Under the rules, most of those districts, and some former members, will have to chip in to cover the deficits -- a hardship now as budgets run low toward the end of the school year.
"I feel that we have been blindsided," said DJ Skogsberg, superintendent of the one-school
The pool, called the
Pool officials say deficits are simply part of the cyclical nature of a costly and hard-to-predict business. They said they held off as long as they could before charging districts more, and they expressed surprise at the state's probing.
It's not clear what, specifically, stirred the
But the Tribune reviewed 10 years of the pool's financial reports and other records, finding that:
--WCSIT posted deficits three years in a row, ballooning to
--The pool's membership has plummeted, from 365 districts in 2003 to 193 in 2013, draining the chief source of revenue: contributions from districts. Meanwhile, two school organizations that endorsed the pool continued to get five- to six-figure "royalties" for their sponsorship. Last month, one of the organizations decided to drop its sponsorship.
--The pool's refusal to turn over documents to the state has prompted a stern rebuke. One
Pool lawyers say they don't believe regulators have the authority to examine the pool's books. In a letter to the state, one attorney called the state's efforts unprecedented and accused the state insurance director of "trying to bully" the companies that run the pool.
Pool board member
Eddy said he supports WCSIT, in part, because "it provides an important option for school districts." But he said he understands the frustration of school officials who got a letter this month saying bills were on the way.
"If I would have gotten a letter at this time of year, I would have been upset," Eddy said. "Now, hopefully after I calmed down, I would have understood the factors involved."
'Propaganda' warnings
Staff salaries make up most of school district budgets. But insurance, from health to property and casualty to workers' compensation, is also a big-ticket item. For example,
Workers' comp covers medical bills and other expenses when employees get hurt on the job, from employees falling to getting injured while helping young athletes.
Governments can save money on such insurance by joining together in pools that share the burden of covering claims. There are more than 40 government pools in
The majority of WCSIT's districts are downstate, but about two dozen are in the
Competition has been increasing from other government pools as well as private companies such as
Last summer, WCSIT sent a letter warning districts against buying into "propaganda created by competitors." The letter said the unnamed competitors "would want you to believe" that WCSIT and an associated pool were "bankrupt."
While officials say current claims are being paid, the pool's mounting deficits mean it does not have enough money on hand to pay all future claims.
In the fall, the state's chief insurance examiner sent a letter to a WCSIT attorney questioning the budget year 2012 deficit and a
The pool's manager,
On
The state wanted a litany of documents, from investment and bank statements to cash flow projections, insurance agreements and marketing materials, records show.
"I thought, 'What is this all about?'" Woodard later told the Tribune.
When the examiners left that day without the records, the state followed up with another financial warrant. By month's end, WCSIT and several Sandner-related companies filed suit in
Pool attorney
But then a major pool for school districts in
Around the same time the
"If these pools go belly up, it's back on the taxpayers to pay these claims," said state Sen.
This year, Mulroe said, there's been lobbying to scale back the
The department declined to discuss WCSIT and its lawsuit. A spokeswoman issued a statement saying the department backed last year's legislation for more authority because it protected "consumers in these pools and the taxpayers who are responsible for funding them."
Bills and confusion
With all the controversy swirling, one of WCSIT's two sponsors -- the
Executive Director
That would have been during the time WCSIT's numbers were under scrutiny and the pool filed its lawsuit.
With few exceptions, school districts interviewed by the Tribune said they had no idea of the turmoil.
In south
"There were some questions there, but we did not have a lot of answers," Early said.
WCSIT's
Such assessments are not uncommon. WCSIT imposed
Woodard, of the
Several large WCSIT districts in the
In tiny
"They're not getting a dime until after
Overall, "I am very freaked. I'm a one-building district. I can't imagine what other districts are like," Skogsberg said. "(The assessment) is definitely going to kick all of our butts. It's crazy."
___
(c)2014 the Chicago Tribune
Visit the Chicago Tribune at www.chicagotribune.com
Distributed by MCT Information Services
Wordcount: | 1936 |
Advisor News
Annuity News
Health/Employee Benefits News
Life Insurance News