Gov. Jan Brewer and legislators broke the law by trying to balance last year's budget with cash from the State Compensation Fund, a judge has ruled.
Maricopa County Superior Court Judge Larry Grant rejected arguments by attorneys for the state that it was entitled to "sweep" nearly $4.7 million from the fund. They contended the money paid to the Industrial Commission actually belongs to the state.
But Grant said that ignores the plain language of the law which requires the cash to be held "in trust" for the benefit of injured workers.
The ruling does not require the state to come up with the cash, as attorney David Ouimette had obtained an injunction last year keeping the money where it was while the case made its way through the court system. But it means that money state lawmakers thought they could get to help them through the ongoing financial crisis won't be available unless an appellate court decides otherwise.
Under Arizona law, all companies are required to provide coverage for their employees who are injured or killed in work-related accidents. Some firms purchase private insurance; others self-insure.
The Industrial Commission maintains a special fund for cases where an employer has not obtained the proper insurance, with the cash earmarked for medical bills and other benefits for the injured worker.
Lawmakers, looking to balance last year's budget, voted to take cash from various special accounts, ranging from the Central Arizona Project to tobacco education funds. The cash from the special fund at the Industrial Commission was one of those on the list.
Brewer signed the legislation authorizing the fund transfers.
Assistant Attorney General William Richards argued that lawmakers were entitled to decide what to do with the funds.
Grant said that's not the case.
"The proceeds held by the special fund are insurance proceeds held in trust for the benefit of employees and employers covered by the Workers' Compensation Act," the judge wrote.
Farrell Quinlan, director of the Arizona chapter of the National Federation of Independent Business, called it "a big victory for employees relying on these funds" as well as on the companies who have a financial interest in the workers' compensation system being solvent.
"The court agreed with NFIB and other plaintiffs that the special fund was never intended to be an optional piggy bank ready to be broken open when the state can't balance its budget," Quinlan said.
The governor's office did not immediately respond to requests for comment.