COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. No.:         4599-02

Bill No.:          HB 2311

Subject:           Employees - Employers; Labor and Industrial Relations Department; Workers                         Compensation

Type:              Original

Date:               March 11, 2008

Bill Summary:            This proposal modifies workers' compensation payments to dependents.

FISCAL SUMMARY

Numbers within parentheses: ( ) indicate costs or losses.

This fiscal note contains 6 pages.

☐ Estimated Total Net Effect on All funds expected to exceed $100,000 savings or (cost).

☐ Estimated Net Effect on General Revenue Fund expected to exceed $100,000 (cost).

FISCAL ANALYSIS

ASSUMPTION

Officials at the Department of Labor and Industrial Relations (DOLIR) assume this legislation abrogates a Supreme Court decision regarding the Second Injury Fund. DOLIR at this time is unable to determine how the recent Missouri Supreme Court decision in Schoemehl v. Treasurer of the State of Missouri, 217 S.W. 3d 900 (Mo 2007) will impact Second Injury Fund payouts for cases involving permanent total disability benefits over the long term. A recent Actuarial Review of the Second Injury Fund (completed July 30, 2007) determined that this court decision, which this legislation abrogates, "…has a relatively insignificant impact on expected calendar payments for the next five years… [2008 to 2012]." Since this legislation abrogates the Schoemehl decision, such action would create a savings for the Fund, however, DOLIR cannot determine the amount of savings.

Officials at the Office of Administration assume the State of Missouri’s self-insured workers’ compensation program, the Central Accident Reporting Office (CARO) covers state employees (excluding MoDOT, Missouri State Highway Patrol and University of Missouri systems). CARO is currently obligated to ongoing weekly benefits to 14 past state employees deemed to be permanently and totally disabled. Of these, 13 cases have the potential for extended dependent obligations at the time of death of the employee resulting from the Schoemehl decision. Currently CARO does not maintain dependent status on these 13 cases. In addition to these cases, CARO has identified an additional 19 cases that may result in permanent total disability in the very near future.

The U.S. Census Bureau indicates of the total households of one wage earner and two earners or more, single wage earner households account for 50% of the total. Applying the 50% to the 13 cases, 6.5 cases may be single wage earner households, thus at the time of death of the employee, the spouse may be a sole dependent. The average weekly compensation rate for these cases is $252.35 multiplied by the 6.5 cases equate to $1,640.28 in weekly benefits. Of the additional 19 cases, 9.5 cases would be considered as possible single wage earner households with spouses as sole dependents. The average weekly compensation rate for these cases is $304.92 multiplied by the 9.5 cases equate to $2,896.74. Combining the two sets, the total weekly obligation to extend benefits to sole dependents is $4,537.02 or $235,925.04 annually.

The length of this obligation is difficult to assume. However assuming the employee should die of natural causes and that the spouse may be near the age of the employee, we are projecting 10 additional years for the remaining spouse. Therefore the savings would be for approximately 10 years for the cases identified. This does not take into consideration any minors that may be deemed to be sole dependents at time of the employee’s death.

ASSUMPTION (continued)

While the state, to date, has not yet incurred any additional cost due to the Schoemehl decision, we do assume an annual cost savings of approximately $235,925 to the State of Missouri with the proposed legislation. No cost inflator is utilized in that weekly compensation rates remain the same throughout the period of obligation

Officials at the Office of the Attorney General assume a potential cost savings in the long term.

Officials at the Missouri Department of Transportation (MoDOT) assume that MHTC is self-insured to provide workers' compensation coverage to employees. This legislation will have a positive fiscal impact on MoDOT/MHTC if it passes.

Officials at the Administrative Hearing Commission, Department of Insurance, Financial Institutions and Professional Registration, Department of Conservation and the Office of the State Treasurer assume that there is no fiscal impact from this proposal.

FISCAL IMPACT - Small Business

This proposal may result in a cost savings to businesses.

FISCAL DESCRIPTION

The proposed legislation appears to be in response to the recent Missouri Supreme Court decision Schoemehl v. Treasurer, MLW No. 55251, wherein the court ruled that permanent total disability benefits should be paid to surviving dependents of an injured employee after the employee dies, even if the death was unrelated to the work injury.

This legislation is not federally mandated, would not duplicate any other program and would not require additional capital improvements or rental space.

SOURCES OF INFORMATION

Administrative Hearing Commission

Office of the Attorney General

Office of Administration

Department of Conservation

Office of the State Treasurer

Department of Insurance, Financial Institutions and Professional Registration

Department of Labor and Industrial Relations

Missouri Department of Transportation

                                                                                                Mickey Wilson, CPA

                                                                                                Director

                                                                                                March 11, 2008