U.S. judge blocks Pa. from immediately seizing $200M from insurer to balance state budget
A federal judge has, at least temporarily, blocked Gov. Tom Wolf and the Legislature from forcibly siphoning $200 million from a quasi-state agency to help balance Pennsylvania’s cash-starved budget.
U.S. Middle District Chief Judge Christopher C. Conner issued a preliminary injunction this week barring the state from making good on a threat to dissolve the Pennsylvania Professional Liability Joint Underwriting Association if it doesn’t hand over that money by Dec. 1.
Conner’s order puts the issue on hold until a federal trial can be held on the dispute.
In granting the injunction, he noted the nonprofit association, although created by the state, does not and never has received state funds. It is financed completely by mandatory contributions from 621 medical malpractice insurers.
Conner’s approval of the injunction is at this point just a temporary victory for the association. If the agency wins the case, however, it will punch a major hole in the $2.2 billion package Wolf and legislators cobbled together to fill the state’s funding gap.
The association filed suit right after Wolf signed Act 44, which demanded the $200 million, on Oct. 30. The money is to come from the association’s budget surplus.
The Legislature created the association in 1975 to provide medical malpractice coverage for hard-to-insure clients, including doctors with a history of malpractice claims, those with gaps in coverage, and those reentering practice after license suspensions.
None of the association’s money is held by the state treasury, Conner noted. At the end of the 2016 fiscal year, the group logged a surplus of just over $268 million.
Act 44 states that there has been a decline in the need for the association’s services and that the agency has more than enough money to meet its mandate. So, it continues, squeezing $200 million from the association “is in the best interest of the residents of this commonwealth.”
Conner cited the association’s claim that it will lose more than $200 million if it is forced to comply with the state’s hand it over or die command. It could cost another $20 million to pry the cash from the group’s investment portfolio, agency officials contend.
“All told, the association faces considerable financial harm,” the judge wrote.
“We have no quarrel with the governor’s assertion that the citizens of this commonwealth have a genuine interest in a balanced budget, and we are not unsympathetic to the Byzantine intricacies of the General Assembly’s budget process,” Conner added. “But a sovereign cannot achieve a legitimate end by unconstitutional means.”
Whether the state’s means in this case are unconstitutional remains to be determined, he found. In granting the injunction, Conner promised to expedite the case to quickly reach a resolution as to whether that $200 million is really the state’s for the taking.
He also ordered the association to post a $2.9 million bond for the continuation of the court fight.