REPORT TO THE CITY COUNCIL
June 16, 2016
FROM: JEFF CARDELL, Director
Personnel Services Department
BY: MICHAEL PAYNE, Risk Manager
Personnel Services Department
SUBJECT
Title
***RESOLUTION - 49th amendment to the Annual Appropriation Resolution (AAR) No. 2015-104 appropriating $2,210,000 in the General Fund for the payment of claims and refunds in the Workers Compensation Fund. (Requires 5 affirmative votes)
Body
RECOMMENDATION
It is recommended that Council approve the attached Resolution which provides $2,210,000 of additional appropriations in the General Fund for the payment of Claims and Refunds in the Workers’ Compensation fund due to adverse developments during the current fiscal year.
EXECUTIVE SUMMARY
The City’s self-insurance funds provide the resources to pay claims and claims-related expenses associated with Property, Liability and Workers’ Compensation claims. Due to greater than expected Workers’ Compensation claims experienced, additional appropriations are required in the General Fund for the Workers’ Compensation fund to bill the additional expense in Fiscal Year 2016.
BACKGROUND
Each year when the budget is adopted, the City appropriates funds to cover the estimated medical, disability and related expenses of the self-insured Workers’ Compensation program. This year the total appropriations in the Workers’ Compensation Fund are $13,058,000. Unfortunately, the City has incurred medical expenses greater than estimated in large part due to a single catastrophic loss. In addition, claims expenses (largely disability and medical expenses) have increased by 32.6% on average per open claim when compared with the prior fiscal year. Consequently, the Workers’ Compensation fund will be recouping the additional amounts needed by allocating charges to the Client Departments and include General, Special Revenue, Enterprise and Internal Service funding sources. Any funds appropriated but not expended by June 30, 2016 will be carried over into the Workers’ Compensation fund balance for next year.
The attached Resolution authorizes additional appropriations in the General Fund only; other impacted funds are able to absorb the additional expense within their current FY 2016 appropriations. The General Fund will offset these additional expenses through recognitions of additional revenues anticipated in FY 2016 for Real & Secured Personal Property Taxes and Franchise Fees.
Since July 1, 2003, the City has been reinsured for individual claim losses that exceed $2,000,000. This means that the City is reimbursed for eligible claims expenses exceeding our $2,000,000 self-insured retention. Prior to that date, the City was reinsured at $1,000,000 for each claim.
ENVIRONMENTAL FINDINGS
By the definition provided in the California Environmental Quality Act Guidelines Section 15378 this item does not qualify as a “project” and is therefore exempt from the California Environmental Quality Act requirements.
LOCAL PREFERENCE
Local preference is not implicated because this item does not involve public contracting or bidding with the City of Fresno
FISCAL IMPACT
Approval of the attached resolution will provide additional appropriations in the current fiscal year in the General Fund thereby allowing billing by the Workers Compensation Fund. the impact to the General fund will be increased expenditures which will be offset by recognition of sufficient revenues to cover the additional portion of the expenditure. The remaining allocations to other funds will not have a significant Fiscal Impact as these funds have identified sufficient savings that will allow them to cover the additional expense within their current appropriation authority. Any amount not used for refunds and claims or associated expenses will be included in the carry over balance in the Workers’ Compensation Self-Insurance Fund in FY 2017.
Attachment: 49th Amendment to the Annual Appropriation Resolution