Exhibit C

C
olorado
L
egislative
C
ouncil
S
taff

STATE
FISCALIMPACT

Drafting
Number:
Prime
Sponsor(s):

TITLE:

LLS050238
Rep.Coleman
Sen.Takis

Date: January18,2005
BillStatus: HouseBusinessAffairs
FiscalAnalyst: AmyLarsen(3038663488)

CONCERNING INCREASED
COMPENSATIONLAWS.

FiscalImpactSummary

ENFORCEMENT

OF

FY2005/2006

StateRevenues
GeneralFund
CashFund

THE

WORKERS'

FY2006/2007

$150,000
50,000

StateExpenditures
GeneralFund
CashFund
FTEPositionChange
OtherStateImpact:
TABORImpact
EffectiveDate:
UponSignatureoftheGovernor

0.0FTE

0.0FTE

AppropriationSummaryforFY2005/2006:None
LocalGovernmentImpact:
None

SummaryofLegislation
Under current law, an employer who fails to have or keep workers'
compensation insurance is subject to penalty by the director of the Division of Workers'
Compensation. Thedirectormay eitherorder the business operationstopped, orimpose a fine
ofupto$500perdaythat the employer is in default. The fine is only imposed for those
days after the employer receives the notice of default, and the fine is suspended if the
employer provides evidence of insurance. Collected fines are credited to the Workers'
CompensationCashFund.
The August 2004 Audit Committee Report for the Division ofWorkers'Compensation
found that the Division had not collected fines from any employers for failure to
maintainrequired insurancesince November 1999. Thereportrecommendedstrengtheningthe
Division'sabilitytoenforcelawsrelatedtoworkers'compensationinsurance.

Thisbillmakesthefollowingchanges:

gives the director of the Division of Workers' Compensation flexibility with the
hearingtimescheduleandprocedures
imposes a fineofnotmorethat$250per dayforfirsttimeviolationsandnotlessthan
$250ormorethan$500perdayforsubsequentviolations
removeslanguagelimitingfinestoperiodsafternotification
removes the director's obligation to suspend fines if the employer provides proof of
insurance
clarifies the Divisions' authority to fine insurance carriers who knowingly or
repeatedly violate any provision of theWorkers'CompensationActofColorado,as
determinedbythedirector
requiresthedirectortopromulgaterulestospecifythecircumstancesandcriteriafor
determiningfines
established new reporting and record keeping requirements of employers and
insurancecarriersand
specifiesthat25percentoffinescollectedbecreditedtotheWorkers'Compensation
CashFundand75percenttotheGeneralFund.

StateRevenues
In FY 200506, no fine revenue is anticipated. The Division will promulgate the rules
requiredbythebillandprovidetherequisitenoticingtoemployersandcarriers.
In FY 200607, it is estimated that fines of $200,000 will be collected based on the
followingassumptions:

15employerswithaninitialviolationandaveragefineof$500(15X$500=$7,500),
5employerswithasubsequentviolationandaveragefineof$28,500
(5X$28,500=$142,500),and
5insurancecarrierswithaviolationandaveragefineof$10,000
(5X$10,000=$50,000).

Of the $200,000 in fine revenue, $150,000 will be credited to the General Fund and
$50,000totheWorkers'CompensationCashFund.
StateExpenditures
Whilethenumberofpenaltyordersissuedwillincrease,theDivisionexpectstobeable
to handle the increased caseload through efficiency savings and thepromulgation of rules to
expedite the process. The Division anticipates only minor programming changes to enable
electronic submission of reports. The minimal costs associated with thisbillwillbeabsorbed
withinexistingappropriations.
StateAppropriations
NonewappropriationswillberequiredinFY200506toimplementthisbill.
DepartmentsContacted
LaborandEmployment