Senator Forrester Muddies Waters at LGC Hearing

Senator Jeanie Forrester who was appointed by former Senate President Peter Bragdon (who now works for the Local Government Center’s (LGC) Health Trust) to sit on the legislative committee that is reviewing and recommending rules which will effect the LGC, muddied the waters at today’s hearing.

Senator Forrester stated - towards the conclusion of todays hearing - that she was disappointed in both parties (the Local Government Center and the Bureau of Securities Regulation) for not being able to reach an agreement and work out a compromise. 

But didn't the Bureau of Securities Regulation (BSR) attempt to come to an agreement with the LGC before the administrative hearing that has led to over $2 million in legal expenses that will be paid by towns (taxpayers) that are members of the LGC? 

Hasn’t the BSR negotiated successfully with both Primax and School Care, in returning surplus funds to their members and getting them to agree to abide by rules consistent with RSA 5B which governs managed risk pools?

And even after the administrative order requiring the LGC to return $50 million, restructure their Trusts and 19 other issues, hasn’t the BSR continued to try and negotiate with the LGC to reach a compromise on how the surplus funds can be returned to their members?

The answer to all those questions is a resounding yes.

There were many other issues at todays hearing, including testimony by Karen Liot Hill a city councilor from Lebanon. She testified that the reason for the illegal LGC reorganization in 2003 was to offer one stop shopping for the members of the LGC’s Trusts. However the LGC’s former executive director  (John Andrews) testified at the administrative hearing, that the reorganization was in response to a former employee who founded Primax and for the ability of the LGC to remain competitive with their former employee in the workers comp market. 

And let’s also put aside (for now) Liot Hill’s testimony that it was okay for LGC’s Trusts to share (commingle) members funds - even though there were members who only belonged to one of the Trusts.

Putting that aside let’s get back to Senator Forrester. Even if there was merit in her statement, was this the appropriate time to offer an opinion that appears to be better left for observations after all testimony has been taken. It seems to me that the questions that have been directed at the BSR at last weeks hearing and today for the LGC (by those on the committee) focused on specific issues related to either the final order from the administrative hearing or the need to amend RSA 5B. 

Senator Forrester asked a couple of questions last week and it seemed she was challenging the final order’s requirement that the LGC must return surplus funds to their members. 

This was also a point brought up today by those testifying for the LGC. They all insist that rate stabilization trumps state law. However they fail to tell you that over the years they used surplus for rate stabilization there was no indication there was any reduction in their net assets after claiming to adjust rates. It appears that there is no relationship between rate reductions and net asset changes. So where did the money come from that the LGC has claimed they have used for rate stabilization?

The LGC and Senator Forrester will tell you that rate stabilization makes it easier for Towns to plan their budgets and lessens the shock to property taxes that a rate increase can have. Here’s what they don’t tell you. The LGC can return the surplus to Towns in the form of cash and the Towns can set up a reserve fund that they can use to stabilize their Towns’ taxes, that would have resulted from rate or premium increases.

There were numerous other statements that were made by those representing the LGC which either defy facts, logic or both. But the big issue - once again - is conflict of interest.

Senator Bragdon was hired as the executive director of the LGC’s Health Trust. Senator Bragdon appointed Senator Forrester to the committee that will either agree with the BSR and the administrative order that the LGC is appealing to the State’s Supreme Court or the committee may make recommendations that are more favorable to the LGC. But wouldn’t it be reassuring to know that those on the committee are approaching this with an open mind? Wouldn’t it be reassuring to know that none of the committee’s members were appointed by the executive director of the Health Trust?

Let’s not forget that under the terms of the final order the Health Trust is required to pay back $33 million to their members. And the Property and Liability Trust owes the Health Trust $17 million that is slated to go back to members.

So once again I’m writing about another ethical quagmire. A muddied mess, made so by competing interests. Interests that a reasonably educated individual plucked off the streets for an opinion would find to be a conflict. 

So although we have only had the second of 6 scheduled hearings by the committee, Senator Forrester has already shown her hand. It’s the BSR’s fault. Again how does Senator Forrester come to the conclusion that the BSR wouldn’t play ball when the other two managed risk pools were willing to abide by the BSR’s oversight and interpretation of State Law. How is it that the two other pools continue to work hand in hand with the BSR. And how, when time after time the LGC was asked by the BSR to work things out and the LGC declined, is the BSR the party at fault?

Part of the answer to these questions will be addressed at the committee’s next hearing on September 4, when the other risk pools will a have an opportunity to testify. But the bulk of these questions can be answered by looking at the record. Thousands of pages of testimony point to the LGC’s unwillingness to cooperate with the BSR.

And now a Senator who either hasn’t looked at the record or is prejudging the issues being testified on makes a statement that belies the facts. And what muddies the waters, is how she wound up on the committee.