State Fund board to meet on lawsuit against state
HELENA, Mont. (AP) — The Montana State Fund board of directors is scheduled to meet Wednesday to inform two new board members about a lawsuit the state fund filed against the state the same day the new board members were appointed, fund president and CEO Laurence Hubbard said Monday.
The lawsuit, filed on Nov. 17, argues a measure that allows the Montana Board of Investments to charge a temporary 3 percent management fee on state fund assets above $1 billion is unconstitutional. The bill, which would raise about $15 million over two years, was among several passed during the recent special session of the legislature to address a projected $227 million state budget deficit.
The state fund, which sells workers’ compensation insurance, has about $1.5 billion in assets.
Board chairman Lance Zanto requested Wednesday’s special meeting, Hubbard said. An attorney will be available to answer questions about the lawsuit. If the board decided to reconsider the lawsuit, that’s their prerogative, Hubbard said.
The board voted 6-0 on Nov. 10 in favor of lobbying against the legislation and to take any legal action necessary to prevent the transfer of state fund assets, Hubbard said. One member attending via phone call was not on the line when the vote took place.
The board also will take public comment at Wednesday’s meeting. Hubbard said they anticipate hearing from a number of people “encouraging the board to continue with the action.”
The day the lawsuit was filed, Gov. Steve Bullock appointed two new members to the seven-member board — former Democratic Sen. Cliff Larsen of Missoula and Jim Molloy, a former senior policy adviser to Bullock. They replace Bruce Mihelish and Richard Miltenberger, whose terms had expired in April.
The governor’s spokeswoman, Ronja Abel, said Monday the governor’s office was not aware of the lawsuit when the appointments were made. She acknowledged representatives of the governor’s office have been talking with state fund officials about their concerns with the complaint.
The complaint argues state law requires premiums collected by the state fund and the interest and dividends on investments to only be used for the operations and obligations of the state fund. Supporters of the legislation argued asset management fees are a normal cost of doing business.
District Judge Mike McMahon has denied the state fund’s request for a temporary restraining order to prevent assessment of the management fees and McMahon also questioned whether the state fund “has established a legitimate cause of action or that it is likely to succeed on the merits of its claims.”
McMahon set a Dec. 4 hearing on the state fund’s request for a preliminary restraining order.