BILL NUMBER:  S7037

 TITLE OF BILL :

An act to amend the workers' compensation law, in relation to
eliminating unconstitutional language relating to the pre-audit of
expenditures from the state insurance fund by the state comptroller

 PURPOSE :

This bill eliminates unconstitutional language relating to the
pre-audit of expenditures from the state insurance fund by the state
comptroller.

 SUMMARY OF PROVISIONS :

There are two sections numbered 88 in the Workers' Compensation Law.
Section 1 of this proposal amends the Section 88 of the Workers'
Compensation Law that was amended by Chapter 635 of the Laws of 1996.
The amendment eliminates unconstitutional language relating to the
pre-audit of expenditures from the State Insurance Fund ("Fund") by
the State Comptroller and makes it clear that there can be no
exemption from the State Comptroller's constitutionally mandated
pre-audit authority and therefore, the payments made from the Fund are
subject to such constitutionally mandated authority.

              

Section 2 of this bill states that this act would take effect
immediately.

 PRIOR LEGISLATIVE HISTORY :

S.4034 and A.3732 (Passed Assembly) of 2013-2014
S.7562 and A. 10316 - (Passed Assembly) of 2011- 2012
S.4925 and A.7505 - Passed Both Houses 2015 - Veto Message 240

 JUSTIFICATION :

Chapter 635 of the Laws of 1996 made major changes to the State's
workers' compensation system. As part of that chapter, Section 88 of
the Workers' Compensation Law was amended to provide that the Fund
shall not be considered a State agency or fund for purposes of Section
4 of the State Finance Law, thus eliminating it from the appropriation
requirement of that section, and eliminating approval of the Fund's
budget by the Budget Director. The amendment was intended, in part, to
prevent further transfers of the State Insurance Fund's moneys to the
State's general fund.

Apparently, as a corollary to eliminating the Fund from the
appropriation requirement of Section 4 of the State Finance Law,
another of the 1996 amendments to Section 88 of the Workers'
Compensation Law exceeded the intended purpose by attempting to
eliminate the constitutionally mandated pre-audit of the Fund's funds
by the Office of the State Comptroller ("OSC") pursuant to Article V,
Section 1 of the State Constitution and the statutory codification of
such Constitutional provision in Section 111 of the State Finance Law.
However, the requirements of appropriation and pre-audit derive from
two separate constitutional provisions.

Section 4 of the State Finance Law, which requires appropriation of
all money "under the management of the State, or any agency or officer
thereof' is broader than the constitutional appropriation requirement
of Article VII, Section 7, as articulated by the Court of Appeals. In
Anderson v. Regan (53 N.Y.2d 356) the Court indicated that "off
budget" funds (those deposited outside the State Treasury) are not
subject to the appropriation requirement of Article VII, Section 7.
Therefore, it is constitutionally permissible to remove off-budget
State funds from the appropriation requirement of State Finance Law
Section 4. However, it does not follow that off-budget funds can be
removed from the constitutional pre-audit requirement, which derives
independently from Article V, Section 1 of the New York State
Constitution.

Article V, Section 1 mandates the pre-audit by the Comptroller of all
money of the State and all money under its control, and is not limited
to funds in the State Treasury. Section 111 of the State Finance Law
is merely a codification of that constitutional requirement. The
exemption of the Fund from the appropriation requirement of Section 4
of the State Finance Law does not alter the fact that the Fund's
moneys are both money of the State and money under the control of the
State for purposes of Article V, Section 1 of the State Constitution.

Since 1996, in accordance with its constitutional duty, OSC has
continued to audit the State Insurance Fund's administrative payments
and the Fund has continued to pay the administrative expenses required
by Section 88. The provisions of this proposal would simply remove the
unconstitutional impediment to audit payments from the Fund itself and
do not impose any significant or duplicative auditing requirements on
OSC or the Fund. Nor would this amendment impose an unreasonable
burden on the Fund given that the current practice granting OSC direct
access to necessary files streamlines the entire process. If, in
addition to an OSC audit, an audit is performed as a part of an
internal control process, there is a benefit to the auditee since such
audits provide objective assurance on the audited area. However,
performance of an internal control audit cannot supersede a
constitutionally mandated audit by the State Comptroller and must
viewed as an additional safety mechanism. Further, a statute cannot
eliminate the Comptroller's constitutional responsibility to audit
payments.

In 2015, the Governor signed into law Chapter 566 of the laws of 2015
authorizing an enterprise fraud prevention and detection system to be
established by the State Comptroller for the purpose of developing and
implementing techniques and technologies to detect and prevent fraud.
The new law directs state agencies to fully support and cooperate with
the State Comptroller by providing OSC with access to requested data,
in accordance with applicable state and federal law, in order to allow
such data to be integrated into such analytic efforts as the state
comptroller may deem necessary for the purpose of detecting and
preventing fraud, waste and abuse and improper payments by state
government. This action is a clear example of the general agreement by
the Executive that granting access to OSC is imperative if OSC is to
continue to perform its constitutionally mandated duties.

Accordingly, the Comptroller urges passage of this legislation.

 BUDGET IMPLICATIONS :

This bill has no fiscal impact for the Office of the State
Comptroller, the State Insurance Fund or any other state entity
because no significant requirements or activities are imposed by the
proposal. The Comptroller currently audits the Fund and therefore no
additional resources would be necessary. The sole purpose of the bill
is to eliminate unconstitutional language from

Section 88 of the Workers' Compensation Law.

 EFFECTIVE DATE :
This bill would take effect immediately.