PHOENIX - Arizona lawmakers are moving to privatize SCF Arizona, the state-created entity that is the largest provider of workers' compensation insurance coverage for employees' on-the-job injuries.
This week the House Commerce Committee unanimously endorsed legislation to require SCF Arizona to become a mutual insurance company owned by its policyholders and subject to state insurance regulators.
SCF Arizona, formerly known as the State Compensation Fund, supports the conversion, said James Stabler, a vice president. "We do not anticipate any significant change in SCF's core business operations."
Senate President Bob Burns proposed the legislation to separate the organization from state government on Jan. 1.
SCF Arizona has been trying to sever ties for years, the Peoria Republican said. "It's time to set them free."
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That would make it clear that the fund isn't associated with state government and would remove any state liability, Burns said.
The bill specifically states that the private company would not be a state agency or other public entity and would be responsible for its own obligations. Also, by July 1, 2012, SCF Arizona must change its name and no longer use SCF or State Compensation Fund.
In recent years, the fund has battled with lawmakers over proposals to use some of the fund's money to help balance the state budget.
The change would keep SCF Arizona free from "the whims of the Legislature," said Commerce Committee Chairman Michele Reagan, R-Scottsdale.
Representatives of several major business groups said they didn't anticipate any adverse effects for their many members who are SCF policyholders.
But the president of one group said some financial aspects, including tax implications and SCF's continued ability to pay dividends to members, remain unclear.
"It's one of the greatest assets that this state has," David Jones of the Arizona Contractors Association said. "Will mutualization help it? I don't know. The jury is out."
Jones recommended that lawmakers study options for a year instead of deciding now on privatization.
SCF Arizona said it serves 42,000 businesses. Private insurers also provide workers' compensation business in the state.
DID YOU KNOW
The state created the State Compensation Fund in 1925, the same year Arizona began requiring employers to provide workers' compensation coverage. Originally part of the Industrial Commission, the fund was made a separate entity in 1968.