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MAINE WORKERS COMPENSATION BOARD

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									                     MAINE WORKERS' COMPENSATION BOARD
                           Board of Directors’ Meeting
                              September 12, 2006


A Business meeting of the Maine Workers’ Compensation Board of Directors was held
on Tuesday, September 12, 2006, at the Board’s Central Office, located in the Deering
Building on 90 Blossom Lane in Augusta. Chairman Dionne called the meeting to order
at 11:03 a.m.

                                            ROLL CALL
PRESENT: Paul Dionne, Gary Koocher, John Cooney, James Mingo, Rodney Hiltz,
Anthony Monfiletto and Joan Kirkpatrick (via telephone).


                                    CHAIRMAN REPORT
1)    Board Deliberations on Today’s Agenda Items: After acknowledging the large number of
      people in attendance at today’s Board meeting, from the Business community, that have an interest in
      today’s deliberations on the Board’s budget for fiscal years 2008 and 2009,
      Chairman Dionne inquired of Board members if they have any objections to
      moving ahead on the agenda to deal with the FY08/09 budget Item, listed
      under Old Business, to accommodate the Members of the Public who attended
      today’s meeting to observe the Board’s deliberations on its budget for fiscal
      years 2008 and 2009. Following a brief discussion on the other items on today’s
      agenda that may also require formal Board action, Directors agreed to deal with
      the budget matter at this time and to return to the other items following its
      discussion.

                                         OLD BUSINESS
1)    WCB FY08/09 Budget: Chairman Dionne apprised directors, staff and Members
      of the Public that the Board postponed its August 22nd deliberations to this
      meeting to allow staff sufficient time to provide the Board members with the
      information requested by Budget Subcommittee Member J.Cooney and that the
      Board has been granted an extension until September 15th to file its FY08/09
      biennial budget.
                                            2


                        OLD BUSINESS CONTINUED

W.C.B. FY/09 BUDGET CONT’D

     Discussion:
     Directors and Staff discussed Budget Subcommittee Member J.Cooney’s comments
     regarding the concerns he has with the expenditure increases in the Board’s
     biennial budget for fiscal years 2008 and 2009 and the process in place for
     generating the funds to pay for the operations of the WCB
     (Budget Subcommittee Member J.Cooney advised Board members and
     Attendees that he and the other Management members of the Board are
     concerned with the spending rate for fiscal years 2008 and 2009 and reported the
     Budget Subcommittee and Board members have discussed the language in the
     statute as it relates to the funds generated through the Board’s assessment with
     respect to how the assessment is generated, calculated and accounted for, as well
     as the Board’s authority over its reserve account. Mr. Cooney, in his closing
     comments, reported the Management caucus has evaluated the data provided to
     them by
     Board staff and have offered an alternative budget for FY08 and FY09
     that reflects flat spending from 2007).

     Anthony Monfiletto MOVED TO PROPOSE A BIENNIAL BUDGET FOR FY08 OF
     $9,810,160 AND $10,052,372 FOR FY09, WHICH REPRESENTS A 2.6%
     INCREASE FOR FISCAL YEAR 2008 AND A 2.5% INCREASE FOR FISCAL YEAR
     2009 AND PROPOSES NO INCREASE IN THE BOARD’S STAFFING LEVEL;
     PERSONNEL COST INCREASES ARE ATTRIBUTED TO FIXED PERSONNEL COSTS
     SUCH AS INSURANCE AND RETIREMENT, THE ALL OTHER ACCOUNT IS
     VIRTUALLY FLAT-FUNDED AND THE MINIMAL INCREASE RELATES TO FIXED
     RENT AND OVERHEAD CHARGES AND TO USE $1,010,160 FROM THE RESERVE
     ACCOUNT FOR FY08 AND TO SUBMIT LEGISLATION TO BE EFFECTIVE FOR
     FY09 THAT TIES THE ASSESSMENT TO THE ALLOCATION APPROVED BY THE
     LEGISLATURE; Rodney Hiltz seconded.

     Discussion:
     Directors, Staff and Members of the Public (whose names may be misspelled) discussed
     the above motion tying the approval of the biennial budget to legislation (In
     response to Director Mingo’s remarks, Director Monfiletto stated his proposal
     addresses the entire budget process);



                                        Minutes of Board of Directors September 12, 2006 Business Meeting
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                       OLD BUSINESS CONTINUED

W.C.B. FY/09 BUDGET CONT’D

     Discussion Continued:
     the data the Board members have received over the last few weeks on the
     assessment and budget processes in place for the Workers’ Compensation Board
     (Chairman Dionne stated there is agreement amongst the Board members on the
     need to address the issues that have been raised regarding the processes in place
     for the assessment and reserve account and noted the Board members have
     received a great deal of data and education on the matter over the last couple of
     weeks and that prospectively the Board needs to deal with the issues before them
     on the biennial budget for FY08 and FY09); providing the general public with an
     opportunity today to ask questions and to provide Board members and Staff
     members with their feedback on the matter so that the agency has an
     understanding of the Business community’s perspective on issues relating to the
     Board’s budget process; discussing the motion before the Board at this time and
     proposed amendments, if any, prior to taking formal action on the two-year
     budget; the Budget Subcommittee’s deliberations this morning, prior to the
     Board meeting, on the budget proposal for fiscal years 2008 and 2009 (Mr.
     Monfiletto apprised directors and staff of his involvement in the budget process
     for many years, during his tenure on the Board, and noted there are questions
     and concerns raised every year about the matter and stated the Board needs to
     find a way to address the funding problems facing the Board. Mr. Monfiletto
     asked those
     Board members with a background in finance to assist the Board in developing a
     plan of action to resolve the issues that come up every year); Director
     Monfiletto’s clarification of the motion he proposed this morning on the
     biennial budget for FY08 and FY09 (Mr. Monfiletto informed directors, staff and
     attendees that his motion proposes to raise the assessment cap by 2.6% for FY08
     and another 2.5% for FY09, and that he is proposing the Board submit legislation
     on the matter because the Board is the only State Agency without a salary plan.
     Mr. Monfiletto noted the lack of a salary plan has lead to funding problems when
     there are contractual increases and related expenses and remarked that
     legislation will provide the Board with an opportunity to address personnel costs
     as they arise. Director Monfiletto stated the Board cannot account for contractual
     increases and related expenses at this time and



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                       OLD BUSINESS CONTINUED

W.C.B. FY/09 BUDGET CONT’D

     Discussion Continued:
     commented that the Board is not aware of what increases will go into effect next
     year, when it submits its biennial budget by the end of this week. Mr. Monfiletto
     informed those in attendance that a salary plan will simplify that budget process
     for the Board); the increase the Board has seen in expenditures with respect to its
     fixed costs for rent and heat for the buildings it occupies in several areas of the
     State (Director Hiltz, noting a September 15th deadline for the Board to submit
     the biennial budget, commented the Board must adopt a budget today and that it
     needs to ascertain what amount is needed for the efficient operations of the
     Board. Mr. Hiltz remarked that the pending motion is a starting point to
     facilitate those discussions); explaining the WCB’s budget process to those in
     attendance so that they have a clear understanding as to the operational needs
     of the agency and what steps the Board has taken to streamline the WCB by
     reducing its personnel headcount, not taking on any new projects, reducing its
     overall costs, etc.; Chairman Dionne’s summary on the personnel changes that
     have taken place at the WCB since he began overseeing the WCB (Executive
     Director Dionne advised those in attendance that when he took over the agency
     it had 129 employees and that it currently has 110 employees on its payroll, even
     though the Legislature implemented two new programs for the Board to manage
     which increased personnel needs. Mr. Dionne stated that from 1997 to the
     present the Board went from 129 employees to 114 employees and that after the
     two programs were enacted that the number of employees increased to 122.5
     employees, and that since 1998 the number of employees has gone from 122 to
     110, even after the Board took on the two new programs promulgated by the
     Legislature. Mr. Dionne advised directors and participants that the Board is now
     a more efficient and leaner agency and that he has concerns that if the number of
     employees go below 110 that it will not operate as efficiently); the balance in the
     Board’s reserve account (Precast Concrete Controller Neal Novel stated he has
     concerns the Board may not have a good understanding of its budget process as
     it relates to the reserve account because it is not able to provide an exact figure
     today on the amount in the account, but that it has plans



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                       OLD BUSINESS CONTINUED

W.C.B. FY/09 BUDGET CONT’D

     Discussion Continued:
     to utilize some of the reserve funds for expenditures. Mr. Novel noted he has
     been told that the Management members of the Board have requested the
     amount of the balance in the account and that Staff have been unable to provide
     the information. In response to Mr. Novel’s comments regarding the Board’s
     fiduciary responsibility, Chairman Dionne stated employers have received
     reimbursements and explained to Mr. Novel that General Counsel Rohde will be
     explaining what has taken place with respect to the Board reimbursing
     employers any amount in excess of the reserve allocation, and noted a suggestion
     has been made for staff to report to on the number of years and the returns for
     those years with respect to employer overpayments for a particular year, as
     opposed to providing a summary of the information, per offset, from year-to-
     year. Mr. Dionne informed Mr. Novel that the Legislature has also increased the
     Board’s discretion with respect to the use of its reserve account to cover
     unanticipated contractual increases and related expenses regarding pensions and
     health/dental insurance costs. Mr. Dionne stated the Board is able to use the
     reserve account for such expenditures because it cannot include the cost
     increases in its biennial budget submissions. Mr. Dionne explained that the
     additional employee expenses cannot be included in the Board’s budget until the
     expenses are actually incurred and informed directors and participants that other
     State agencies have a salary plan in place which results in their budgets
     automatically going up to cover such costs. Mr. Dionne reported the Board does
     not have a salary plan and must therefore use funds from its reserve account to
     cover those costs);
     the legislative language in the proposed motion before the Board
     (General Counsel Rohde explained that the legislative language, if passed, will
     result in the Board submitting legislation that will do away with the assessment
     cap and allow the Board to set a budget and when it’s approved, tie the
     assessment to the allocation which will alleviate the need to budget using the
     reserve account to cover those costs.




                                      Minutes of Board of Directors September 12, 2006 Business Meeting
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                       OLD BUSINESS CONTINUED

W.C.B. FY/09 BUDGET CONT’D

     Discussion Continued:
     Mr. Rohde advised participants that the Board cannot spend more than is
     authorized by the Legislature); the biennial budget before the Board setting the
     amount it is authorized to spend for the next two years (General Counsel Rohde
     advised Members of the Public that the FY08/09 budget sets the Board’s
     spending authority for the next two years and stated that the contractual
     increases that have been alluded to cannot be included in the biennial budget
     because the expenses have not been incurred yet. Mr. Rohde noted that when
     the expenses are incurred the Board is authorized to use funds in its reserve
     account to cover salary and related increases and that other State agency’s salary
     plans go into effect to cover the costs. And, in response to Mr. Novel’s inquiry as
     to the balance in the reserve account, Mr. Rohde explained that the reserve
     balance is part of the cash balance and that the numbers before the Board are the
     direct result of the assessment process that is in place, which has been in place
     since 1990. Mr. Rohde further noted that in 1993 and 1994 there was a dollar
     amount assessed against self-insured employers and insured employers and that
     the process was changed by legislation and a lawsuit against the Board for
     insured employers whose assessment is now set, prior to the upcoming fiscal
     year, in April, at which time the Board, with the assistance of the Bureau of
     Insurance, determines what percentage the Board should set the assessment at to
     collect enough to pay for the operational needs of the Board for the upcoming
     fiscal year.
     Mr. Rohde advised participants that over the course of succeeding fiscal years
     the Board receives money from insurance companies in the form of audit
     payments, when an insurer conducts an audit of its accounts to determine
     whether the premium should have been higher or lower, and remarked that most
     audit shows there are more premium dollars due. Mr. Rohde stated the Board
     members have considered changing the way the assessment is done so that both
     insured and self-insured employers are assessed a dollar amount which would
     alleviate the fluxuation caused by audits and the reconciliation process. Also, in
     response to an inquiry as to whether the Board utilizes a balance sheet to
     perform such calculations, Deputy Director Dunn stated the calculation is



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                       OLD BUSINESS CONTINUED

W.C.B. FY/09 BUDGET CONT’D

     Discussion Continued:
     done every year, when the assessment rate is set, and that when the information
     is provided to the Board that it also includes data on the reserve account); the
     2.5% and 2.6% increase in the proposed biennial budget (Budget Subcommittee
     Member Cooney explained to Members of the Public that the proposed motion
     seeks to approve a budget that increases spending by 2.5% in 2008 and 2.6% in
     2009. Mr. Cooney expressed concerns with the biennial budget before the Board
     reflecting expenditures that have increased approximately 8.5% since FY06 and
     noted the actual increase in expenses has not been consistent with a 2% per
     annum increase. Mr. Cooney noted the expenses at the Board are projected to
     continue to increase, even though the Board should be seeing a reduction in costs
     because of electronic filings and technological improvements. Mr. Cooney
     commented that the budget before the Board shows a $400,000 annual increase
     for programming costs and noted the Board should be seeing a greater return
     due to its EDI mandate and software investments. Mr. Cooney expressed
     concerns with the entire motion because it seeks to implement a salary plan
     through legislation, even though the Board already has a plan in place to cover
     salary increases and because the motion asks for Board approval to use $1.1
     million from the reserve account. Mr. Cooney stated the funds in the Board’s
     reserve account are a surplus from payments made by employers in the State of
     Maine and is used to fund the Board’s operational needs. Mr. Cooney stated he
     is unclear as to whether the legislation being proposed will result in the use of
     reserves in the manner it has in the past, and asked staff how it will work); the
     two-year budget before the Board, for fiscal years 2008 and 2009, being 2% to 4%
     of the overall costs of doing business in the State of Maine (Director Monfiletto
     apprised Board members and Members of the Public that the two-year budget
     only represents between 2% to 4% of the entire workers’ compensation costs in
     the State of Maine and noted a great deal of money is spent by




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                        OLD BUSINESS CONTINUED

W.C.B. FY/09 BUDGET CONT’D

     Discussion Continued:
     companies hiring attorneys to defend them in workers’ compensation cases and
     stated companies should be concerned with having to pay premiums based on
     ten-years of benefits since the maximum benefit level is seven years, which
     companies have been paying since 1992); insured employers paying premiums
     based on ten years of benefits, even though the Maine Workers’ Compensation
     Act only allows an employee to collect benefits for seven years (Director
     Monfiletto advised directors and attendees that he is not aware of any
     complaints that have been filed with the Bureau of Insurance regarding the
     premium base and stated the overcharge is predicted to be close to $9 million,
     over the last five or six years and that it affects approximately 50% of the insurers
     paying workers’ compensation premiums in the State of Maine. Mr. Monfiletto
     stated he is perplexed as to why the Business community is so concerned with
     the Board’s biennial budget since it is such a small percentage of the overall costs
     of doing workers’ compensation business in the State of Maine); the Board
     currently employing 108 full-time employees
     (Executive Director Dionne apprised participants that the Board has
     110 positions, but that two of the positions are vacant); the people in attendance
     today, from the Business community, asking for specific information on the
     Board’s budget figures for fiscal years 2008 and 2009 (Mr. Gore informed the
     Board members that the people in attendance today want reassurance that the
     assessment situation is taken care of, noted he has provided Board staff with a
     summary of the business community’s concerns with the assessment and reserve
     process and
     noted some of his member’s questions still remain unanswered.
     Mr. Gore noted the Board is only entitled to collect 10% above the assessed
     amount); the Board’s assessment being designed to raise the money the Board
     needs for the upcoming fiscal year (Mr. Rohde noted a suggestion has been made
     to amend the Workers’ Compensation Act to




                                       Minutes of Board of Directors September 12, 2006 Business Meeting
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                       OLD BUSINESS CONTINUED

W.C.B. FY/09 BUDGET CONT’D

     Discussion Continued:
     eliminate that possibility by going to a dollar amount for both insured employers
     and self-insured employers and commented that there is no agreement on the
     matter. Mr. Rohde explained that the budget addresses the Board’s spending
     authority. In response, Mr. Gore noted that in 2005 the Board possibly collected
     an amount above the 10% allowed in the statute); the difference between the
     assessment rate and the assessment cap and the Board setting the assessment
     rate below the assessment cap for the years 2001, 2002, 2003, 2004, 2005 and 2006;
     the Board only being allowed to reduce the assessment by any amount paid
     above the amount allowed by statute (Mr. Monfiletto noted the assessment cap
     is the maximum amount the Board can assess and stated that from 2001 to 2006
     the Board has yet to assess the full amount of the cap and commented that in
     2001 the assessment cap was $6.7 and that the Board set the assessment at $5
     million; that in 2002 it was $6.7 and the Board assessed $4.735; that in 2003 the
     cap was $6.8 million and the Board assessed $5.6 million; that in 2004 the cap was
     $8.3 million and the Board assessed $8.1 million; that in 2005 the cap was $8.5
     and the Board assessed $8.4 million and that the cap in 2006 was $8.5 and that the
     Board assessed only $8.1 million. Director Monfiletto also noted that the only
     way the Board can reduce the assessment is to give back to the community the
     monies taken in that are above the amount allowed by statute. Mr. Monfiletto
     stated that the Board’s assessment has always been below the assessment cap);
     the Board’s maximum assessment cap being 6.7 million dollars (Mr. Cooney
     pointed out that the Board actually collected $6.8 million and stated the Board
     should not be going by what the target was or what the model predicted the
     assessment to be, but what the actual collection was. In response, Director
     Monfiletto stated the amount collected allowed the Board to lower the
     assessment amount in 2002 and explained that the Board lowers its assessment if
     too much money is collected and that it returns the money to Maine’s
     employers); how the Board arrives at its




                                      Minutes of Board of Directors September 12, 2006 Business Meeting
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                       OLD BUSINESS CONTINUED

W.C.B. FY/09 BUDGET CONT’D

     Discussion Continued:
     assessment amount as it relates to the reserve account (In response to Maine
     Health Care Association W.C. Administrator P.Cheveman’s inquiry as to how
     the Board can collect money in excess of the cap and use it for another year, and
     how the Board derives its assessment, Chairman Dionne explained that part of
     the assessment is a dollar amount and that part of it is a rate amount, and that
     the rate amount is not as accurate as the dollar amount. Mr. Dionne advised Ms.
     Cheveman that the Budget Subcommittee had discussed converting the process
     into a dollar amount so that insured employers and self-insured employers pay a
     dollar amount, which provides the Board with a more-defined and accurate
     process. Mr. Rohde also informed Ms. Cheveman that the assessment is divided
     between insured and self-insured employers and is based on the ratio of
     disabling cases which runs approximately 40% for self-insured employers and
     60% for insured employers and that the total amount of dollars that the Board
     will raise in a fiscal year is divided by those figures. Mr. Rohde further noted
     that the self-insured dollar amount is calculated based on aggregate benefits paid
     for the prior year and that for insured employers the Board must estimate the
     total premium market for the upcoming year and set the assessment percentage
     so that it is designed to raise the revenue the Board needs. Mr. Rohde stated the
     other part of the process when setting the assessment percentage is to determine
     the funds the Board in surplus, and noted the Board reduces the assessment
     accordingly. Mr. Rohde stated that once that has been done the Board can set the
     assessment percentage so that it is designed to raise the money needed for that
     fiscal year. In response to whether the Board has the authority to change the
     assessment percentage, Mr. Rohde explained that the Board does, but that it has
     only changed the percentage once which resulted in an administrative burden
     for insurers because they had two assessment rates they had to work with
     throughout the course of the




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W.C.B. FY/09 BUDGET CONT’D

     Discussion Continued:
     fiscal year and ongoing. Mr. Rohde stated that in the past the Board included the
     use of the reserve account to fund the difference between the assessment cap and
     for spending, and noted the Board previously submitted legislation to allow the
     Board to rely on the reserve account and to show it as revenue. Mr. Rohde noted
     the Board will submit legislation so that the assessment will be designed to raise
     money to pay for approved operating expenses in a fiscal year, and that there
     will not be a need for the Board to budget based on the reserve account going
     forward. Mr. Rohde noted there will most likely still be a need to do something
     in the middle of the year, or during a biennium to pay for contract increases or
     other increases that cannot be budgeted ahead of time, and that the use of the
     reserve account is one way of doing that. Mr. Rohde also noted the legislation
     will not affect the reserve account or the language in the statute, and that it will
     only change the process in that the Board’s assessment will be tied directly to the
     approved allocation. Mr. Rohde stated any legislation will not go into affect until
     FY09, the second year of the biennium, and noted that in the first year it proposes
     to use $1 million of the reserve account and stated that the timing of the
     legislation works better, if approved, if it goes into affect in 2009, as opposed to
     2008); whether the biennial budget proposed in the pending motion anticipates
     the issuance of an assessment based on the maximum amount for the years 2008
     and 2009 (Mr. Gore inquired of staff as to whether the Board intends to collect
     the 10% allowance above the assessment cap in order to fund its ongoing
     expenses. In response, Deputy Director Dunn stated the amount of the
     assessment rate and amount collected will be set in April); the surplus the Board
     has developed historically to provide additional funding in excess of the cap
     (Mr. Cooney noted the process suggests that the model being used to project and
     develop the assessment rate is flawed and overly-conservative. In response,
     Deputy Director Dunn informed Budget Subcommittee Member Cooney that the
     Board meets with Representatives from the Bureau of Insurance and Maine
     Employers Mutual Insurance Company, Acadia Insurance Company and


                                       Minutes of Board of Directors September 12, 2006 Business Meeting
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W.C.B. FY/09 BUDGET CONT’D

     Discussion Continued:
     Hanover Insurance Company to obtain the premium market, based on the
     insurance market. Mr. Dunn stated the figure used for the last two years has
     come directly from the Maine Bureau of Insurance who estimates what the
     market will be and that once that is arrived at that the calculation is drawn from
     that. Mr. Dunn noted there is not a lot of disagreement on some of the concerns
     that have been raised today and stated a resolution to the problem is to arrive at
     a specific dollar amount for insured employers and self-insured employers,
     which will eliminate the audit and reconciliation process. Mr. Dunn stated the
     approach for the last 12 years is one that was designed to be helpful to employers
     in terms of the offset and explained that employers receive the money quicker
     than if the Board waits until the amount exceeds the 10% allocation. Mr. Dunn
     noted there would be a tremendous administrative concern because the Board
     will need to identify employers and ask insurance companies to identify their
     insurers from four or five years ago which will also create problems. Deputy
     Director Dunn advised directors and members of the public that the same
     process has been in place for the last 10 or 12 years); the Board estimating the
     reserve account balance on an annual basis (Deputy Director Dunn pointed out
     that it is difficult to ascertain the exact amount in the Board’s reserve account
     because the monies are tied to the Board’s cash account. Mr. Gore advised Mr.
     Dunn that he is concerned with the Board using approximately $3.5 million from
     the reserve account to cover its expenditures and stated that if the Board does not
     know how much is in the reserve account that it may be purposely attempting to
     raise more than 10% above the cap. Mr. Dunn explained that the Board has had
     the same process every year with respect to estimating the amount in the reserve
     account, which has always been sufficient. Mr. Dunn noted a suggestion has
     been made that staff perform the process quarterly and stated he is open to that
     suggestion and noted that up to this point the Board has done it on an annual
     basis and that it has not exceeded the cap. Mr. Gore asked how much more is
     currently in the reserve account




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W.C.B. FY/09 BUDGET CONT’D

     Discussion Continued:
     and stated the business community wants the reassurance that there is no an
     attempt to purposefully raise the 10% allowed above the cap and if that is not
     done than the overall assessment can be lowered); the amount in the reserve
     account changing from day-to-day and the Board’s reconciliation of the fund,
     which is done at the time the Board issues the assessment (Deputy Director
     Dunn stated the Board has never been asked for a day-to-day accounting of the
     fund and stated that if there is an interest in having an estimated balance more
     often that it can be done); the Board’s reconciliation process as it relates to its
     cash account (Director Mingo noted it is probably easier to reconcile cash
     accounts on a monthly basis than to do it once a year); comments regarding the
     increase in expenditures and the rationale for increasing the assessment for the
     next two fiscal years (Senior Spectrum Chief Financial Office J.Lauder informed
     the Board that he has been advised that part of the rational for increasing the
     budget for fiscal years 2008 and 2009 is to cover anticipated salary increases, but
     that he is confused because it has been indicated that the Board is prohibited to
     do so. Mr. Dionne stated it is prohibited because there are certain increases
     related to personnel costs such as health insurance, dental insurance and life
     insurance, and noted the State of Maine has reached an agreement on its
     Collective Bargaining Unit personnel, involving clerical workers throughout the
     State, which resulted in a salary increase for the State’s clerical employees.
     Deputy Director Dunn explained to Mr. Lauder that the Board employs more
     clerical workers, due to the nature of the work at the Board, and that the
     agreement affects 47 of the Board’s 110 employees who will receive a salary
     increase as a result of the agreement); the anticipated 2.6% increase for fiscal
     year 2008 being higher than the actual increase (Mr. Dunn stated the Bureau of
     Budget provided the figure to the Board in anticipation of it employing the same
     number of people, and commented that a 3%
     increase would result in the Board needing an additional $200,000.
     In response, Mr. Hiltz stated the Board’s budget is not all salaries and




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W.C.B. FY/09 BUDGET CONT’D

     Discussion Continued:
     stated the salary increase is only a portion of the anticipated 2.6% increase. Staff
     stated the salary increase totals approximately 80%. Public Participant Michelle
     Greenier also pointed out that the Board provided its Senior managers with an
     annual 3% salary increase that its other employees received in July under the
     Collective Bargaining Unit agreement); the efficiency of the Maine Workers’
     Compensation Board (Metzer Paper Company Representative C.Golick, referring
     to a letter he received regarding all of the improvements in workers’
     compensation with respect to the number of claims being down, the number of
     mediations being done and the implementation of an electronic filing process,
     inquired of staff what kind of measures are in place to determine the workload
     and efficiency within the Board’s departments and whether the Board does any
     outsourcing to save even more money. Mr. Golick reported his company went
     from 135 people in 1997 to 66 employees in 2006 and advised the Board that his
     company is doing double the volume of work. In response, Executive Director
     Dionne noted the information he received from the Maine Chamber of
     Commerce indicated there had been a 15.2% decline in the number of First
     Reports filed from 2002 to 2004 and noted that since 2002 the Central Office staff
     has decreased from 42 to 34, which is a 19% decrease. Mr. Dionne also reported
     on the reduction in mediations and a decrease in the backlog and commented
     that the more appropriate measure should be the assignment of meditation cases
     to the Board’s mediators which decreased by 9% and over the same period of
     time the mediation staff was reduced by 10% and commented the Board is trying
     to balance the decrease in workload by the decrease in personnel. Mr. Dionne
     also indicated that between 2002 and 2005 the number of petitions is down 8%
     and the reduction in the hearing officers was down 10% so again the reduction is
     higher than the decrease); the differences in the practices followed by Public
     Sector Employers and the practices




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W.C.B. FY/09 BUDGET CONT’D

     Discussion Continued:
     followed by State Government (Director Hiltz noted that the WCB and other
     State agencies must provide services that require public servants and case
     managers. Mr. Hiltz invited people to attend the Board’s meetings so that they
     can be kept apprised of the Board’s activities and informed those in attendance
     that there are many issues that need to be considered, and remarked that the
     issue of concern should to Public participants should be the premiums they are
     paying based on benefits payments for ten years, as opposed to seven years,
     which is the benefit maximum allowed in the statute. Mr. Hiltz stated there any
     many things that affect this Board and the efficiencies of the agency. Mr. Hiltz
     stated the budget before the Board members allow the agency to continue to run
     and stated the process being used has been the same process in place for years.
     Mr. Hiltz advised participants that the Board is open to suggestions on changing
     the process and setting future budgets and stated the Worker Advocate Program
     is restricted by the budget process which results in the program running less
     efficiently because there are Worker Advocates who are unable to get
     depositions done or work overtime to prepare for a case, and provide employees
     with the representation they need).

     Rodney Hiltz MOVED TO AMEND THE MOTION TO INCREASE THE BOARD’S
     BUDGET BY 1.5 MILLION DOLLARS FOR THE WORKER ADVOCATE DIVISION;
     Joan Kirkpatrick seconded.

     Discussion Continued:
     Directors, Staff and Members of the Public discussed employers and insurers paying
     in excess of $25 million over the last five, or six years for legal services to defend
     cases and Public Participant M.Greenier’s request for information on Contract
     Worker Advocate M.Friedman, which Chairman Dionne ruled to be irrelevant to
     the amendment before the Board.

     Amendment Fails 3-4 (Directors Dionne, Mingo, Cooney & Koocher opposed).




                                        Minutes of Board of Directors September 12, 2006 Business Meeting
                                         16


                       OLD BUSINESS CONTINUED

W.C.B. FY/09 BUDGET CONT’D

     Discussion Continued:
     Directors, Staff and Public Participants discussed how many Temporary employees
     and Contract employees the Board utilizes and whether the number has
     increased or decreased over the last few years (North Center Foods’
     Representative L.Davis asked staff if the Board uses temporary and contract
     employees and if so, asked what is causing an 8% increase in the Board’s costs.
     In response, Executive Director Dionne advised
     Mr. Davis that the Board has a Contract Hearing Officer who deals with cases
     involving a conflict of interest situation with a hearing officer, which costs the
     Board $10,000-$15,000 a year and that the Board has a contract with a Retired
     physician who assists the Board with the independent medical examiner process
     at a cost of approximately $10,000 a year.
     Mr. Dionne also informed Mr. Davis that the Board has a contract for
     technological assistance with another State department that is $200,000
     a year. Mr. Dionne stated one of the driving forces for the expenditure increase
     was the reclassification of 47 of the Board’s clerical employees which resulted in
     a cost in excess of $300,000); the large increase in the
     Sta Cap, which is an expense agencies pay for rent and services provided by the
     State of Maine such as building security, payroll and auditing services, etc.
     (Deputy Director Dunn stated the costs have risen dramatically and noted the
     Board has no control over the amount it is charged and commented that the State
     of Maine removes the monies from its account every quarter for the Sta Cap. Mr.
     Dunn noted that the charge in 2002 was $140,000 and that it was $460,000 last
     year and commented that the increase had a large impact on the Board’s budget.
     Mr. Dunn reported the Board investigated the increase to determine whether the
     amount was appropriate and/or incorrect and was clearly advised that the
     amount was correct and that the Board had been misassessed in prior years and
     should have been paying more in 2000, 2001 and 2002, and remarked that five
     years ago the amount was $140,000 and this year it is $460,000 and stated it is a
     tremendous pressure on the Board); the Board’s efforts to streamline the agency
     and reduce its overall costs (Cedar Works Representative D.Prevaro stated he is
     pleased to hear the Executive Director’s remarks about the Board’s reduction and
     streamlining of its




                                      Minutes of Board of Directors September 12, 2006 Business Meeting
                                          17


                        OLD BUSINESS CONTINUED

W.C.B. FY/09 BUDGET CONT’D

     Discussion Continued:
     agency and stated there appears to be substantial decreases afforded by
     efficiencies and reductions in staff and asked how the Board arrived at the same
     level and not have a reduction in the budget because of the changes. Mr. Dionne
     stated the increase is mainly due to payroll and related increases and the
     associated costs for health insurance and pension increases) and an option
     available to the Board being the return of the prevail standard, which will
     reduce the Board’s operating costs by approximately 2 million dollars if it closes
     the Worker Advocate Program.

     Anthony Monfiletto MOVED TO AMEND THE MOTION TO REVISE THE
     CURRENT WORKERS’ COMPENSATION STATUTE TO INCLUDE A PREVAIL
     SECTION AND IN THE EVENT IT PASSES THAT THE BOARD THEN REMOVE
     APPROXIMATELY $2.0 MILLION FROM ITS BUDGET BY CLOSING THE WORKER
     ADVOCATE DIVISION; Rodney Hiltz seconded.

     Discussion Continued:
     Directors, Staff and Public Participants discussed the Board receiving figures from
     the National Council of Compensation Insurers (NCCI) approximately seven
     years ago which indicated that the prevail standard would cost the system an
     additional $25 million (Mr. Dionne noted the Worker Advocate Program costs
     approximately $2 million a year and commented that the program provides a lot
     of benefits to injured workers and an even greater benefit to employers and
     insurers because it keeps the prevail standard out of the system); the amount
     employers and insurers are currently paying for legal services (Mr. Monfiletto
     stated that his motion will reduce the Board’s budget by approximately $2
     million and advised participants he is not aware of any complaints to date
     regarding the costs employers and insurers are paying for their legal services);
     the Budget Subcommittee’s deliberations on the cost of the Worker Advocate
     Program and the prevail standard; the budget process not requiring a full
     exhaustion of the items brought before the Board in Subcommittee
     (Mr. Hiltz noted the amendments were proposed in the context of the



                                       Minutes of Board of Directors September 12, 2006 Business Meeting
                                           18


                          OLD BUSINESS CONTINUED

W.C.B. FY/09 BUDGET CONT’D

     Discussion Continued:
     discussion on the budget and noted today’s proceedings are not unusual and
     that the Board provides it’s Members with sufficient time to work on an item and
     remarked the amendment is in order. Mr. Monfiletto stated he addressed the
     issue with the Budget Subcommittee this morning and stated Budget
     Subcommittee Member Cooney was not in favor of the proposed amendment,
     that commented he is hearing the Board’s budget is too high and is attempting to
     lower the budget. Mr. Monfiletto noted the prevail standard needs to be
     returned to the statute to protect Maine’s injured workers. Mr. Greenier also
     expressed support for returning to the prevail standard and commented Small
     businesses will see a return on their money because it will stop some of the abuse
     in the system and make it work better for both employers and employees).

     Gary Koocher MOVED TO CALL FOR THE QUESTION; James Mingo
     seconded. MOTION PASSES 7-0.

     AMENDMENT FAILS 3-4 (Directors Dionne, Mingo, Cooney & Koocher opposed).

     Anthony Monfiletto MOVED TO CALL FOR THE QUESTION; Joan Kirkpatrick
     seconded. MOTION FAILS 3-4. (Directors Dionne, Mingo,
     Cooney & Koocher opposed).

     Discussion Continued:
     Directors, Staff and Public Participants discussed Maine employers funding the
     Workers’ Compensation Board who are asking for an accounting of where the
     money it contributes goes, how it is used and the process in which the Board
     decides to spend it (Bath Iron Works Representative M.Ouellette advised
     directors that the Business community is simply asking for data on how the
     money it contributes is spent); the assessment figures produced by staff regarding
     the assessment set for 2006
     (Chamber of Commerce Representative P.Gore, referring to the FY06 line item in
     the Board’s documentation, stated that below the figure is an assessment amount
     of $8,874,698 and noted that in the 2006 column, on the handwritten sheet, the
     assessment is $8,525 and asked why there is a difference in the two figures. In
     response, staff noted 8.5 million dollars is the Board’s assessment cap).

                                        Minutes of Board of Directors September 12, 2006 Business Meeting

                          OLD BUSINESS CONTINUED
                                         19


Directors caucused at 12:32 p.m.; returned to the meeting at 12:51 p.m.

W.C.B. FY/09 BUDGET CONT’D

     Discussion Continued:
     Directors, Staff and Public Participants discussed the audits that are conducted
     on the Board’s biennial budgets (In response to Maine Council of Self-Insured
     Representative V.McLaughlin’s inquiry as to the audit process used for
     reviewing the Board’s budget, Mr. Dunn informed
     Mr. McLaughlin that the Department of Audit looks at the Board budget every
     year at a cost to the Board); the positive feedback the Board members received
     today on staff’s expertise at answering the questions raised today; producing a
     budget analysis periodically for the Budget Subcommittee’s perusal; the Board
     making its budget process more visible and more-defined in the future; whether
     the Members of the Public, in attendance at today’s board meeting, approve or
     reject the motion seeking Board approval on the proposed FY08/09 biennial
     budget, the development of legislation to create a salary plan and the proposed
     utilization of $1.1 million from the Board’s reserve account to fund the budget
     (In response to Director Cooney’s suggestion that the Board ask for a show of
     hands from those in attendance as to whether they approve or reject the
     proposal, Director Hiltz stated the Board welcomes feedback on items that come
     before it, but that it does not conduct polls before voting on matters).

     Rodney Hiltz MOVED TO CALL FOR THE QUESTION; Joan Kirkpatrick
     seconded. MOTION PASSES 4-3 (Directors Mingo, Cooney & Koocher opposed).

     Chairman Dionne called for a vote on the pending motion:
     Anthony Monfiletto MOVED TO PROPOSE A BIENNIAL BUDGET FOR FY08 OF $9,810,160
     AND $10,052,372 FOR FY09, WHICH REPRESENTS A 2.6% INCREASE FOR FISCAL YEAR
     2008 AND A 2.5% INCREASE FOR FISCAL YEAR 2009 AND PROPOSES NO INCREASE IN
     THE BOARD’S STAFFING LEVEL; PERSONNEL COST INCREASES ARE ATTRIBUTED TO
     FIXED PERSONNEL COSTS SUCH AS INSURANCE AND RETIREMENT, THE ALL OTHER
     ACCOUNT IS VIRTUALLY FLAT-FUNDED AND THE MINIMAL INCREASE RELATES TO
     FIXED RENT AND OVERHEAD CHARGES AND TO USE $1,010,160 FROM THE RESERVE
     ACCOUNT FOR FY08 AND TO SUBMIT LEGISLATION TO BE EFFECTIVE FOR FY09 THAT
     TIES THE ASSESSMENT TO THE ALLOCATION APPROVED BY THE LEGISLATURE; Rodney
     Hiltz seconded. MOTION PASSES 4-3 (Directors Mingo, Cooney & Koocher opposed).

                                      Minutes of Board of Directors September 12, 2006 Business Meeting
                                         20


                       OLD BUSINESS CONTINUED

Directors caucused at 12:32 p.m.; returned to the meeting at 12:51 p.m.

W.C.B. FY/09 BUDGET CONT’D

     James Mingo MOVED TO ADJOURN; Gary Koocher seconded. MOTION
     FAILS 3-4 (Directors Dionne, Mingo, Cooney & Koocher opposed).

     Discussion:
     Directors, Staff and Public Participants discussed the Board no longer accepting
     comments on the amendments and motions the Board has already voted on; not
     adjourning today’s meeting until after the Board acts on the draft minutes and
     receives a report from the Executive Director and General Counsel; Board staff
     preparing alternatives for the Budget Subcommittee on fixing the budget
     problems and allowing the Board to answer some of the questions raised today.

                                    MINUTES
1)   Draft Minutes (August 22ndh Business Meeting and Public Forum): Directors
     received and approved the draft minutes of the Business meeting and Public
     forum they held at the Lewiston Regional Office
     on August 22nd.

     Gary Koocher MOVED TO APPROVE THE DRAFT MINUTES OF
     AUGUST 22, 2006; John Cooney seconded. MOTION PASSES 7-0.

                     EXECUTIVE DIRECTOR REPORT
1)   Future Board Meetings: Executive Director Dionne informed Board members of
     his plans to conduct a poll as to their availability to attend a board meeting on
     September 26th to make sure a quorum will be present and informed Board
     members he cannot attend the meeting and that they will need to appoint a
     Board member to chair the proceedings.
     Mr. Dionne also advised the Board that the meetings scheduled for October 10th
     and October 24th will take place at the Central office, in Augusta, and
     commented staff have notified the Portland office of the change in the location
     of the second meeting in October.
                                         21


                     EXECUTIVE DIRECTOR REPORT
                            CONTINUED

FUTURE BOARD MEETINGS CONT’D

     Discussion:
     Directors Mingo, Dionne and Koocher discussed their inability to attend the next
     board meeting due to other commitments; the Board meeting with Practical
     Actuarial Consultant J.Kadison on October 24th; a quorum being four members in
     attendance, and the Board canceling its next meeting if there is not a quorum of
     members that will be present at the meeting and
     the Board not holding a business meeting this year during the 14th Annual 2006
     Comp-Summit Conference.

                       GENERAL COUNSEL REPORT
1)   W.C.B. Draft Rule Chapter 3: General Counsel Rohde announced that the
     Board will be holding a 9 o’clock public hearing on W.C.B. Draft
     Rule Chapter 3 on October 5th at the Central Office in Augusta.

2)   Board Review of hearing Officer Decisions: General Counsel Rohde reported the
     Record has been sent to the parties in the Fernald and
     Babine case and noted that a motion has been received from Bath Iron Works
     Corp. in the Babine case seeking to supplement the Administrative Record to
     include a transcript of the hearing in the other case and an Affidavit of a B.I.W.
     employee. Mr. Rohde advised the Board that the parties attempted to enter the
     documents into evidence at the formal hearing level but that the documents
     were excluded and commented that the opposing party has filed an objection
     to the motion arguing that 39-A M.R.S.A. §320 says the Board decision will be
     based on the Record and Written briefs only and that the Board’s rules say the
     Record shall consist only of all evidence considered by the hearing officer. Mr.
     Rohde stated they are arguing the hearing officer did not consider the
     information and therefore it should not be allowed into the Record
     before the Board.

     Anthony Monfiletto MOVED TO DENY THE MOTION TO SUPPLEMENT THE
     RECORD IN THE CASE OF BABINE V. BATH IRON WORKS CORP.; Rodney Hiltz
     seconded. MOTION PASSES 7-0.



                                      Minutes of Board of Directors September 12, 2006 Business Meeting
                                        22


                               NEW BUSINESS
1)    14th Annual Comp-Summit Conference: Executive Director Dionne provided
      Board members with a list of the Board members and Staff members attending
      the 2006 Comp-Summit Conference, scheduled to take place in Carrabasset
      Valley on September 17th, 18th and 19th.

                             ADJOURNMENT
      Gary Koocher MOVED TO ADJOURN; John Cooney seconded. MOTION
      PASSES 7-0.

The meeting formally adjourned at 1:06 p.m.




                                     Minutes of Board of Directors September 12, 2006 Business Meeting

								
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