Local Government Center fight goes back many years

Last modified: 8/28/2011 12:00:00 AM
Much has been written about the Local Government Center since the recent release of the state Bureau of Securities Regulation's final report on its investigation of LGC practices. The scathing report documents highly questionable actions on the part of an agency charged with safeguarding taxpayer money intended for health care.

However, the controversy over LGC and its practices is far from new. As a legislator, I tried to bring greater accountability and transparency to the LGC only to discover just how much power this quasi-governmental, non-taxpaying entity has managed to amass over the years. The well-used threat of increased costs in health care premiums has frightened plenty of town managers into rushing to LGC's aid.

But this highly effective threat is not based in reality. In fact, current evidence suggests that New Hampshire taxpayers have been overcharged for years by the LGC in order to provide money to start new product lines and for lucrative salaries and benefits. Few town officials appear to have asked what their health care rates might have been if the surpluses kept by LGC had actually been refunded as required by law.

It is instructive to review what occurred in the mid-1990s in the health care industry. At that time the rates in the private markets were in some instances half the cost charged by the LGC - but they weren't about to let any of their members leave easily. Oh, they could leave, but their share of the money held in 'reserves' would not leave with them and the LGC made it known they would inform the taxpayer on the local levels just how much was left on the table. Not many politicians are willing to go to the mat when they also have to admit they were duped from the beginning.

This is a great gig the LGC has going. Once a town is in the LGC's system, it can't get out without losing money. The LGC pays no business profits tax or business enterprise tax, thereby giving it an unfair advantage over legitimate insurance businesses within the state. Even with the unfair advantage our communities are paying more than they would otherwise pay for health care coverage of their public employees. The only ones to benefit from this scheme are LGC staffers with their inflated salaries and benefit packages.

The LGC has shown how our antiquated tax laws are being used to put small businesses out of business. I can only imagine how much tax avoidance there is. And again, let's compare the salaries of the employees of the nonprofits to the salaries of the for-profits, and lets include all the benefits in the packages.

If we learn anything, let's hope we learn that any deal that sounds too good to be true is exactly that. The LGC/Municipal Association is nothing more than a for-profit corporation using as board members local officials who serve on a part-time basis. It uses its so-called nonprofit status to avoid taxes and holds excess premiums as the stick that stops members from leaving the costly insurance pool. Now let's see if the Legislature has the guts to fix it so it can't happen again. How about we just add this one to the FRM legislation winding its way through the Legislature. Let's fix all the scams in one swoop.

(Robert E Clegg of Hudson is a former state senator.)




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