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Editorial: At LGC, bigger change needed

Last modified: 4/2/2013 4:30:56 PM
Maura Carroll, former director of the New Hampshire Local Government Center, was not the reason the organization has been embroiled in a long and bitter legal battle with state regulators, the Professional Fire Fighters of New Hampshire, and former member communities. Replacing Carroll with former state economic development commissioner George Bald, skilled manager and public servant that he is, won’t end the fighting. Nor will Bald’s appointment necessarily change long-standing LGC practices found wanting by the state Bureau of Securities Regulation.

What’s needed is far more involvement on the part of communities that purchase insurance coverage through the LGC, a change in the way the organization’s boards are constituted, and clear rules governing the operation of all risk pools and the amount of money they should be allowed to hold in reserve.

The LGC operates three risk pools which, in theory, allow cities, towns, counties and school districts to band together to get the best possible price for employee health, worker compensation and property insurance. In a decision under appeal to the state Supreme Court, regulators ruled that for years the LGC improperly shifted money from its health trust to its trust for worker compensation to allow it to undercut rivals willing to offer communities a better insurance deal. Doing so, regulators say, meant that the LGC overcharged its health insurance customers.

In August, the securities bureau ordered the center to return $52 million to communities and its hearings officer set a cap on the amount of premiums that the LGC could hold as a hedge against an epidemic or natural disaster that might drain the pool of funds used to pay claims. The center says that limit is too low and it’s challenging the order in court.

The hearings officer also ruled that the LGC could no longer use a single board of directors to oversee each of its three trust funds. The nonprofit responded by dividing the board roughly in thirds and making each group the directors of one of the trusts. The same board members however, all of whom are town managers and other public employees, sit on the board of the LGC itself. While that allows for efficiencies, it does create a cozy relationship that could lead to conflicts of interest. The new governing structure violates the spirit, if not the letter, of the law.

The issues in question are complex – those outlined here are but a few of them – and the money at stake big. The combined trusts have roughly $100 million in net assets, money paid by taxpayers. By one estimate, more than $8 billion has passed through the organization’s hands since it began serving as the main insurance broker for New Hampshire’s communities. Yet because of the way it was structured decades ago, the LGC has been allowed to engage in what is now a very big business that uses public money but with relatively little regulatory oversight.

As happens with many boards, nominations for new LGC board members come from existing members. That practice can perpetuate to a group of like-minded people who see little need for change. We urge the government center’s member communities, and those communities that may want to become members, to learn all they can about the LGC and the advantages – or disadvantages as the case might be – of membership, and to select volunteers to run for a seat on the board. That way, no matter what happens in the courts, they’ll have a say in what happens to their money.


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