Friday, October 24, 2003

Peter Robbed Again! Capitol Cops Clueless.

I know that you have an opinion of the coal industry. Please put it aside for a moment.

The Coal Workers’ Pneumoconiosis Fund, commonly called the Black Lung Fund, has been around for thirty years. During that period, politicians have changed eligibility requirements. Initially, a claimant needed only to prove employment in coal mining and then have a doctor certify that black lung was present. In the program’s second decade, eligibility rules were tightened considerably by the Reagan administration and afterwards the claims approval rate dropped to about 7% of claims filed. Then, on his way out the door, Bill Clinton loosened the cuffs with a last minute order. It is now projected that 12 claims per hundred will be approved-an increase of 71%.

Regardless of how you vote, you need to realize that the black lung benefit program has always been about political expediency. It is not a humanitarian effort to aid and comfort miners who will die from this horrible occupational illness. It’s just a government program that is periodically massaged to curry favor.

Coal companies that are participating members in the Black Lung Fund (BLF) fund the plan by paying a percentage tax on gross payroll. While eligibility requirements for black lung benefits have ebbed and flowed, the payroll tax rates have remained constant. This anomaly allowed the BLF to grow substantially beyond its initial payout projections.

In 1990, the WV Legislature smelled the giant truffle growing in the BLF. They rooted out $210 million of overfunding and transferred it to the Workers’ Compensation Division. Yes, Workers’ Comp needed a slug of money even back then. There was a proviso in that legislation that Workers’ Comp could only invest the $210M and spend only the income that it earned.

This year, the legislature faced the ignominy of placing Workers’ Comp in receivership and was once again in crisis mode. As expected, they went sniffing for truffles. They found that the BLF was again overfunded and ordered a transfer of $170 million to Workers’ Comp.

But the 2003 Workers’ Comp bill took a different turn when it came to spending the BLF money. Not only does the law allow the new and improved Workers’ Compensation Commission to spend this current transfer of $170M but it also frees the restriction on the 1990 transfer of $210M. Thus, $380,000,000 of coal industry payroll taxes are being spent to stem the growing Workers’ Comp unfunded liability which is $7 billion.[1]

The black lung tax is a specific tax levied on a specific group of taxpayers to redress a specific problem. By rights, the money should either be paid out to black lung claimants or else be refunded to the companies that overpaid the tax.

Failing that, let’s be practical. You might argue that the BLF surplus be used to build new coal-hauling highways or to repair existing roads damaged by overweight coal trucks. You might argue that the surplus be used to reclaim abandoned coal mines. You also might argue that the surplus be used to abate acid water drainage. These damages are, at the least, coal-related.

However, to argue that the BLF surplus be used to subsidize the Workers’ Comp deficit is very wrong.

The WV Legislature created the Coal Workers’ Pneumoconiosis Fund in 1973 to allow coal companies to comply with federally mandated requirements. The Fund is required by law to be, and has always been, separate and distinct from the Workers’ Comp fund, not an adjunct to it. This distinction needs maintained for either plan to have legitimacy.

Whether you call this a "commingling" or a "confiscation" makes little difference. The safe has been cracked, the money is gone. If the taking of BLF surplus is deemed acceptable for this purpose by the citizenry, then what is to prevent the legislature from seizing other trust funds and spending them on the Comp debt?

We are just one step away from making Workers’ Comp a general obligation of the taxpayer. If that step is taken, then the ultimate trust fund is tapped-your individual savings. The road to serfdom is shorter than you had hoped.

There is a great political irony playing out on our mountain stage. Ronald Reagan’s policy changes created the giant BLF surplus. But now that the money has been spent, Bill Clinton’s reversal of fortunes might actually cause the BLF to develop an unfunded liability in future years.

Wouldn’t that just be West Virginia’s luck?

You may now return to your previously-held opinion of the coal industry.

[1]  From interview with WV Worker Compensation Commission Director Greg Burton in the State Journal, October 3, 2003