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Eight businesses sue state over new law

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POLSON — The National Federation of Independent Business and eight Montana businesses filed suit in Lake County District Court last week against the state for alleged breach of contract and constitutional violations because of a new law that imposed a 3-percent management fee on the Montana State Fund in relation to workmen’s compensation insurance. 

The Legislature passed SB 4 during a special session last November. The law, which was signed by Gov. Steve Bullock, will result in nearly $30 million being taken from the Montana State Fund’s reserves as part of a measure to shore up a budget shortfall, including $14.6 million in Fiscal Year 2018 and $15 million in FY 2019. 

“This money is collected as insurance payments from policyholders to be used for the benefit of injured workers,” said state Rep. Greg Hertz, R-Polson, in a press release. “These funds are private assets and it is unconstitutional for the government to disguise this taking as a ‘fee’ and use the money for purposes that are not related to worker’s compensation.”

Hertz’s business, Moody’s Market, aka Super One Foods, is one of the eight that filed the suit as part of the Montana State Fund Justice Coalition, which he said was set up late last year. 

“When there are excess dollars in the State Fund, they have, by law, been returned to policyholders to reduce premiums and the cost of doing business in Montana,” said Wayne Dykstra, owner of Liquid Engineering Corp. of Billings, a plaintiff in the suit. “This is an outright seizure of private assets that would set a precedent and put our worker’s compensation system in jeopardy.” 

Dykstra and Richard Miltenberger are former members of the State Fund board of directors who were replaced by Bullock last November. After he appointed their replacements, the board voted to withdraw from a lawsuit it had filed against the state and Board of Investments in November about the new law in Lewis and Clark County, Hertz said. 

In addition to breach of contract, the plaintiffs request a declaratory judgment that the new law and associated statutes violate the state and federal constitutions. 

The suit also requests that the state Board of Investments be prevented from transferring the funds in question to the state Fire Suppression Account or any other state fund. 

Hertz said he filed the suit in Lake County to get it away from the “capital culture” in Helena. 

Workmen’s compensation insurance was created by the state Legislature in 1915, and the State Fund was set up in 1990, according to 

State Rep. John Fleming, D-St. Ignatius, has said that he supported SB 4 and noted that the Montana State Fund has a surplus of more than $1 billion.

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