State Senator Mary Lazich (R-New Berlin) represents parts of four counties: Milwaukee, Waukesha, Racine, and Walworth. Her Senate District 28 includes New Berlin, Franklin, Greendale, Hales Corners, Muskego, Waterford, Big Bend, the town of Vernon and parts of Greenfield, East Troy, and Mukwonago. Senator Lazich has been in the Legislature for more than a decade. She considers herself a tireless crusader for lower taxes, reduced spending and smaller government.
The Legislative Audit Bureau (LAB) has completed a statutorily-required review of the Local Government Property Insurance Fund. The fund provides property insurance to counties, towns, villages, school districts, and other local units of government and is operated by the Office of the Commissioner of Insurance (OCI).
During June 2008, the Property Fund insured 1,124 local units of government with insured property valued at $45.5 billion. The total number of governmental units insured has dropped from 1160 during 2005 to 1124 during 2008. Even so, the value of insurance continues to increase due to inflationary increases in the property base and of new construction.
As of March 31, 2009, OCI reports a surplus balance of $40.0 million. There have been steady surplus increases since fiscal year 2003-04 due to premium rate increases. Factor in fewer claims than had been anticipated and the Property Fund started to reduce rates July 1, 2005. However, during the next three years, the fund had its highest claims because of numerous weather-related episodes. Total claims were $18.4 million in fiscal year 2005-06, $23.3 million in fiscal year 2006-07, and $24.0 million in fiscal year 2007-08.
The LAB asserts that monitoring the status of the surplus is critical:
“The larger the surplus, the greater the assurance that sufficient funds will be available to pay claims. The surplus may also help to keep premium rates stable and to ensure that reinsurance is available and affordable. However, too large a surplus balance may indicate the premium rates are too high, and the Property Fund must balance its need for an adequate surplus with local governments’ needs for reasonable premium rates, especially as their financial resources are shrinking.”
The LAB recommends that OCI continue monitoring the surplus balance so that it remains proper, especially considering the tough economic times local units of government currently face.
The LAB also discovered during its review that OCI was charging appropriations based on the purchase and implementation of a new computer system to manage the Property Fund during 2004. OCI was not charging costs based on a consistent methodology. The LAB recommends the OCI establish and keep records of a methodology for charging costs to its administration and operations appropriations and obtain the proper authorization from the Legislature if large, one-time purchases are made, to ensure appropriate allocation of costs.
Once again, I commend the LAB for an outstanding review. You can see the full audit report here.