The gubernatorially appointed board of directors for Montana State Fund voted to drop a lawsuit challenging the governor’s proposal to charge the carrier a management fee on its investment portfolio to help bridge a $227 million budget deficit, according to a report by the Great Falls Tribune.

Gov. Steve Bullock

One day after a special budget session ended with lawmakers passing a bill to assess the 3% management fee that is projected to generate $29.7 million over the next two years, the board on Nov. 17 filed a lawsuit claiming that the transfer of funds violates a statute prohibiting the Legislature from tapping into the carrier’s coffers.

But the board on Wednesday voted 5-2 to drop the lawsuit over Senate Bill 4, which Gov. Steve Bullock signed into law Nov. 24.

Jim Molloy, a former adviser to Bullock and who was appointed to the State Fund board on the same day the lawsuit was filed, said the carrier is a “creature of the Legislature and subject to the laws of the Legislature” in supporting a motion to drop the complaint.

The governor appointed Molloy and former Democratic state Sen. Cliff Larsen to replace Bruce Mihelish and Richard Miltenberger, whose terms expired in April.

Lance Zanto, chairman of the State Fund board whose term also expired in April and who was reappointed Nov. 17, said during Wednesday’s meeting that the carrier is required to follow laws passed by the Legislature. He said the board made lawmakers aware of its concern about the bill by filing the lawsuit, and he feared the precedent that could be set if the lawsuit failed, according to the Tribune.

Jan VanRipper, a Bullock appointee whose term expires in April 2019, disagreed. Allowing the state to take the money without a fight would set a dangerous precedent, she said in explaining her opposition to dropping the complaint. Matt Mohr, another Bullock appointee whose term is up in April 2019, joined her in voting against the motion to withdraw the lawsuit.

Employers who purchase workers’ compensation coverage from MSF wanted the carrier to proceed with its challenge against the state, the Tribune reports. The said they believe the money belongs to policyholders and wanted to get a definitive answer from the court on that question.