Department of Insurance

The 21-day amendments to the Executive Budget recommend the following changes (analysis as of February 13, 2008):

• Reduces the department’s appropriations by $1.8 million as follows:
  • -$157,000 in the Administration’s program’s personal service appropriation; the total appropriation is now $8.9 million, a $154,000 decrease from the SFY 2007-08 enacted appropriation.
  • -$139,000 in the Consumer Services personal service appropriation; the total appropriation is now $7.9 million, a $156,000 decrease from the SFY 2007-08 enacted appropriation.
  • -$909,000 in the Regulation program’s personal service appropriation in the Insurance Dep’t Acct; the total appropriation is now $51.2 million, a $1 million increase from the SFY 2007-08 enacted appropriation.
  • -$449,000 in the Regulation program’s fringe & indirect costs appropriation in the Insurance Dep’t Acct; the total appropriation is now $24 million, about the same as the SFY 2007-08 enacted appropriation.

This results in an overall agency appropriation of $314.5 million which is an increase of $14.3 million from the SFY 2007-08 enacted budget.

The Executive Budget recommends (analysis as of January 29, 2008):

A FY 2008-09 workforce of 968.  This is an increase of 24 FTEs from the adjusted FTE level for FY 2007-078.  The following chart identifies adjustments in current fiscal years FTEs along with the recommended differences in FY 2008-09 FTEs by program (if the FTE’s are the same the program is not listed):

• The total appropriation for Personal Service is $100 million, an increase of $6.9 million (7.4%).

• An All Funds appropriation of $316 million, an increase of $16.1 million (5.4%).

• An increase of $11.9 million in the Regulation program’s maintenance undistributed appropriation.  According to the Assembly budget analysis this increase is related to the shift of the Enhanced Newborn Screening Program from the Department of Health to the Insurance Department.  Of this funding, $4.3 million is for personal service and $1.9 million is for fringe benefits.  This transfer accounts for most of the department’s budget increase.

• An increase of $2 million in the department’s overall personal service appropriations is to support the additional 24 FTEs.  According to the Assembly budget analysis, this increase  is distributed as follows:

o   A personal service appropriation increase of $800,000 supports the Regulation Program’s 12 new FTEs related for the administration of Timothy’s Law.

o   $1.2 million of the $2.1 million increase in the Regulation program’s Insurance Department Account’s Special Revenue Other (SRO) personal service appropriation is to support 5 FTEs for activities related to the “Partnership for Coverage” initiative and 7 FTEs to support activities related to the Commission to Modernize the Regulation of Financial Services.

• The Assembly budget analysis indicates that an increase of $506,000 in SRO appropriations is for personal service costs related to overall departmental underlying wage-growth; an increase of $435,000 in SRO appropriations is related to a re-estimate of overall departmental fringe benefit and indirect costs.  An increase of $500,000 in SRO appropriations is related to a shift of the Workers Compensation Task Force from General Fund to SRO funding.  This appropriation reflects 6 months of funding which is believed sufficient for the Task Force to complete its work.  It is unclear in which department program the Task Force’s funding appears. This should be clarified with management.

• The appropriation for contractual services increases by $4 million (2.9%) to $141.5 million.  According to the Assembly budget analysis $3.9 million of this increase is for the increased rental cost for the New York City office.

·          The estimated number of FTE consulting employees decreases to 8 from 10.  The estimated disbursements for consulting services contracts decreases by 15% to $2 million.  The average annual cost per FTE consulting employee increases to $259,000 from $242,000.  The purpose and use of these contract employees and whether they can be replaced by state employees should be clarified at statewide labor management.   

These costs do not include the department’s consultants’ costs that are paid under “direct-pay” contracts which are used to pay outside auditors. Since 2001 the department has wasted over $31 million by using consultant auditors under direct pay contracts instead of filling their state employee auditor/examiner vacancies

·          The Executive Budget recommends Article VII legislation that would:

o   Increase fines and penalties for various violation of the Insurance Law;

o   Authorize the Superintendent to issue cease and desist orders; and

o   Increase the length of time that an individual, corporation, firm, or association must wait to obtain a license after revocation.

Enactment of this legislation is necessary to implement the 2008-09 Executive Budget since the State Financial Plan assumes $1 million in additional General Fund receipts as a result of the increased fines and penalties included in this bill.