SAIF's political risks.

Byline: The Register-Guard

SAIF Corp. is under continuous attack from competitors and from politicians who oppose publicly run businesses on principle. SAIF has withstood these attacks over the years by providing workers' compensation insurance at rates low enough to win it the support of Oregon businesses. But if SAIF expects to preserve its special status as a nonprofit public corporation, it will have to start acting more like a public agency than a private one.

Last week Gov. Ted Kulongoski ordered an internal review of SAIF's practices, but otherwise stands by the company as "a great success story." The governor's assessment is borne out by SAIF's record of low premiums, prompt payment of claims and low expenses. But SAIF's political problems will continue as long as it keeps handing ammunition to its critics.

SAIF's most aggressive competitor, Liberty Northwest, has fought for years to get the insurer to release financial documents. Now a lawsuit that it helped finance has succeeded, and some of the information that has come to light makes SAIF look like no other creature of state government. It gave $250,000 in severance pay to an executive who resigned in 2001. It paid $1.4 million to two private consultants, one of whom is former Gov. Neil Goldschmidt. State Sen. Vicki Walker, D-Eugene, has filed an ethics complaint, claiming that SAIF has failed to disclose more than $1.5 million in lobbying fees.

SAIF justifies these expenses by saying that it must do business like other insurance companies if it hopes to compete with them. Goldschmidt has terminated his consulting contract, and SAIF claims that much of what Walker counts as lobbying was actually the cost of advertising. But if SAIF's best defense is that it is like other insurance companies, it undercuts its own claim that it is different enough to deserve the tax-free status that gives it a great advantage in the marketplace.

SAIF receives no tax funds; its operations are supported entirely by premiums and earnings on investments. Its basic mission is to provide affordable workers' compensation insurance, and it has been successful - rates have been flat in the past two years, and declined steadily in the 1990s. The low rates deliver a substantial savings to the employers of more than 500,000 Oregonians. A sound and affordable workers' compensation system acts as a strong counterweight to claims that Oregon is unfriendly to business.

Yet SAIF's tax-free status is clearly unfriendly to one type of business - private providers of workers' compensation insurance. Liberty Northwest and others have argued for years that SAIF's advantage is unfair, and that the corporation should be privatized. Failing that, SAIF's critics have claimed that its billion-dollar reserves are excessive and should be returned to policyholders, taken by the state or divided between the two.

Selling SAIF or raiding its reserves has never seemed like a good idea. The former would probably cause workers' compensation insurance to become more expensive and less available, while the latter might leave SAIF without the resources it needs to cover future claims.

Yet when SAIF uses workers' compensation premium dollars for lavish severance payouts, generous consulting contracts and lobbying, and then resists disclosing those facts, the critics' arguments gain credibility. The best way for SAIF to protect its status as a public corporation is to adopt practices consistent with those expected of a public agency. The more it behaves just like any other insurance company, Oregonians will become more willing to consider letting it become one.