WC Liability Challenges Town's Ability to Remain within Tax Cap

Wednesday, January 9, 2013 | 0

Each year, as New York’s municipalities prepare their budgets, they must account for the increasing cost of unfunded mandates.   Since these expenses are mandatory, they cannot be deferred. Since they are unfunded, municipalities must budget for increases while remaining within the 2% tax cap.

Municipal struggles with increasing Medicaid, retirement, and health insurance costs are well known. Recently, a village in the Mid-Hudson valley added workers’ compensation to the list of challenges with unfunded mandates.

The Village of Cornwall-on-Hudson is facing an immediate obligation to pay a lump sum of $40,000 and a long-term obligation to continue payments resulting from a workers’ compensation claim. As a result, it is struggling to put together a budget that will remain within the 2% tax cap mandated by state law.

Jacob Kaplan of the Cornwall Local reported in the Friday, Dec. 21st edition that the village became liable when an employee pursued a workers’ compensation claim after a delay of four years. In addition to the immediate liability, the village must continue payments for the remainder of the employee’s life.

The village is hoping to resolve the claim with a settlement, however, funding presents a significant budgetary challenge. The village’s total budget for 2011/2012 was only $2,445,000. This unanticipated expense is a significant addition to the village’s 2013/2014 budget.

According to the article, the village currently participates in the Public Employer Risk Management Association (PERMA) program, which provides guaranteed coverage for its workers’ compensation losses. The village assumed liability for older claims when the Orange County Workers’ Compensation Pool disbanded.

This expense illustrates a fundamental problem with unfunded workers’ compensation plans: they tend to accumulate liabilities over time and challenge even a prudent budget. Municipal struggles to fund with mandatory health care and retirement costs are common in New York State. The cost of the workers’ compensation mandate has not generally created as great a challenge to municipal employers. It remains to be seen whether Cornwall-on-Hudson’s plight is the beginning of an ominous trend.