Montana bill would pay back money taken for wildfires in 2017

Lawmaker introduces a bill that would make a lawsuit he filed against the state moot

By: - January 13, 2023 2:56 pm

The Montana state Capitol in Helena on Jan. 2, 2023. (Photo by Blair Miller, Daily Montanan)

Hey Montana, do you remember the fires of 2016 and 2017?

Well, even if you don’t, you’re still paying for them – and that’s the genesis of a bill presented by Sen. Greg Hertz, R-Polson, in Senate Finance Committee Thursday afternoon.

Senate Bill 126 would claw back money, plus interest, on funds the state Legislature used when former Gov. Steve Bullock, a Democrat, called a Special Session of the Legislature to help manage the state’s finances, which were significantly over budget, due in large part to a depleted firefighting fund and disastrous wildfire seasons.

“It was a scheme to take $30 million of policyholder money,” Hertz said. “It was like robbing the cookie jar.”

In order to balance the budget, there were spending cuts, transfers from other funds, a deal with a private state prison company and nearly $30 million from the Montana State Fund transferred to help make up the difference.

Both in 2017 and now, the lawmakers cringed at the idea of taking from the Montana State Fund, which is a separate account operated by the state’s board of investments that covers a worker’s compensation fund. The state pays into the fund and is one of the largest stakeholders at approximately 8%. However, most of the fund is comprised of private businesses that pay premiums for worker’s compensation.

Hertz, though, pointed out that Montana law has always mandated that those premiums, interest and fund balance can only be reinvested to benefit the fund and workers, or returned to employers as dividends. Hertz’s bill contends that the 2017 maneuver by the Legislature, which charged a 3% “management fee” on any fund balance of more than $1 billion, was illegal. SB126 would return the money taken in 2017, and add to it the average rate of return that the state earned on its investments in the following years.

SB126 would take $28.3 million from the general fund that the Legislature took in 2017, and also $5,280,299, based on the five-year average rate of return. Montana currently has a budget surplus of more than $1 billion, and Hertz told fellow senators that estimate could grow to as much as $4 billion by the end of 2025, which is why it’s a good time to put the money back.

“There are adequate funds available to us,” Hertz said. “And it’s time to shore it up. We’re in a much better place, and this is a way to make it back to injured workers and employers.”

Hertz said that when employers pay into the fund to cover employees, they understand they’re buying an insurance policy that could rise or lower, but they do not believe they’re paying into the state’s general fund.

“That’s not what I understood when I bought the policy,” Hertz said. Hertz owns several grocery stores and uses the Montana State Fund, he said. “This fee has nothing to do with the management of the fund.”

Legally, the state can charge for managing the Montana State Fund, so the 3% charge is in addition to the management, and Hertz said it serves no other purpose in state law, nor does it benefit the workers or employers paying into the system.

If approximately $33 million is returned to the fund, Montana State Fund employee Ethan Heverly said that money would go toward the portion of the fund held in trust for the employers and employees, meaning that it could go to lower premiums, pay out claims, or even be returned to employers in the form of dividends.

A host of groups ranging from loggers to realtors to the state’s Chamber of Commerce testified in support of the bill, while it drew no opponents.

Hertz and at least one other lawmaker, Rep. Sue Vinton, R-Billings, have more experience with this issue than other lawmakers. Both of them are part of a 12-entity lawsuit against the state which seeks a similar return of “takings” from the fund in 2017.

Both have entered their respective companies in a lawsuit in Lake County that claims the state in its efforts to shore up the budget trammeled on the Montana Constitution. That case is still pending in court, and Hertz was asked about it at the hearing on Thursday.

He confirmed if SB126 passes, it would likely make the lawsuit moot, handing he and others involved, including the National Federation of Independent Businesses, a victory without a judge’s order. It could also mean that the lawmakers may see some financial benefit if the law was passed.

However, a spokesperson for the Montana Senate Republicans pushed back on that idea that it would benefit the lawmakers in an extraordinary way.

“Were SB 126 to pass, it will be up to the State Fund’s Board of Directors to determine how the fund uses the money contained in SB 126. Any decision made by the Fund would apply to all of their many thousands of policyholders equally,” said spokesman Kyle Schmauch.

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Darrell Ehrlick
Darrell Ehrlick

Darrell Ehrlick is the editor-in-chief of the Daily Montanan, after leading his native state’s largest paper, The Billings Gazette. He is an award-winning journalist, author, historian and teacher, whose career has taken him to North Dakota, Minnesota, Wisconsin, Utah, and Wyoming. With Darrell at the helm, the Gazette staff took Montana’s top newspaper award six times in seven years. Darrell's books include writing the historical chapters of “Billings Memories” Volumes I-III, and “It Happened in Minnesota.” He has taught journalism at Winona State University and Montana State University-Billings, and has served on the student publications board of the University of Wyoming.