Budget-Strained, Understaffed Labor Dep’t Struggles with Workers’ Comp

Labor Commissioner Nominee Averil George presents her agency’s budget before the Senate Finance Committee on Thursday.

Department of Labor Commissioner Nominee Averil George told lawmakers Thursday the combination of an unbalanced budget and a staffing deficiency is putting strain on the agency’s abilities to fulfill its mandates, including fully processing claims within its workers’ compensation division.

“From coming onboard, senator, I would say the department is tremendously understaffed, so we are not able to provide to our community as mandated,” said George at her first Senate Finance Committee hearing. She was responding to Sen. Janelle Sarauw’s (IND-STT) inquiry on difficulties within the workers’ compensation unit.

The agency’s workers’ compensation division is “a source of great heartburn” for lawmakers, said Sen. Nereida Rivera-O’Reilly (D-STX). While the agency has paid out some $2.42 million in workers’ compensation benefits, it still owes $6.4 million to Schneider Regional Medical Center, $2.2 million to Juan F. Luis Hospital, and $3.3 million to other medical providers.

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“We have a problem. We have a significant problem in your workers’ compensation administration unit,” said O’Reilly, citing more than $12 million in total owed to healthcare providers that was supposed to be processed by the unit.

George attributed the problem largely to DOL’s staffing shortage.

“I just recently posted approximately eight positions to be filled to assist the workman’s comp unit, and they’re going through the process and we should have those individuals onboard shortly,” said George. She added DOL is also recruiting aggressively for another 14 positions, and has submitted a critical needs list to the Office of Management and Budget.

The staffing issue is not confined to workers’ compensation. According to George, the agency recently lost its fiscal officer, an administrative assistant , an accountant, and its territorial youth coordinator.

But even if they had the staff, the agency still does not have the money to settle its payables, according to George. The workers’ compensation premiums that companies pay the Labor Department vary — construction workers require higher premiums than desk clerks — but invariably, the expenditures outweigh the premiums, according to Labor officials. Sen. Kurt Vialet (D-STX) said until statutes are amended so that the agency’s collections align with its expenditures, the Labor Department will never be in a financial position to fulfill its workers’ compensation obligations.

“That needs to be a priority item because if you don’t fix it, every time you come, you’re going to have a tremendous shortfall,” said Vialet.

One large part of the problem is the advent of catastrophic injuries.

“Say, there’s a fatality or there’s a limb that’s amputated, it could wipe out the fund,” said Nesha Christian-Hendrickson, legal counsel for the Labor Department. “As [Bureau of Labor Statistics Director Gary Halyard] stated, if you have rising costs and the premiums could be as low as $2.12, you’re going to have a great inversion of higher cost and not enough funds.”

Lawmakers also expressed concern about high-risk federal grants being administered by the agency. As of Thursday’s hearing, the Labor Department is in jeopardy of losing some $34,000 in federal grants — a combination of several grants including the Foreign Labor  Certification grant and One-Stop Workforce Information grant — that are in danger of being returned to the federal government. According to George, she does not expect to salvage those funds, which expired in the first half of 2018.

Labor officials said that only one vendor funded by an expired federal grant is still owed money by the agency, and the federal government has granted an extension until September that will allow the department to fulfill its obligations to the vendor. Some 85 percent of 11 vendors expecting payments from the agency have also been paid, according to Labor officials.

This year, the Labor Department is asking for $11.9 million in budget appropriations, $10.3 million of that amount from the general fund. The agency is also receiving $801,333 in local non-appropriated funding and another $6.27 million in non-appropriated federal funding, bringing up the agency’s total fiscal year 2019 budget to $18.19 million.

The Virgin Islands Energy Office also defended its budget on Thursday. According to VIEO Director Elmo Roebuck, the agency’s fiscal year 2019 recommended budget out of the general fund totals $1.12 million, a decline of $135,058 compared with last year’s budget. Of that amount, some $554,000 and $251,000 will fund personnel salaries and fringe benefits respectively.

The 12 percent decline in VIEO’s budget, mandated by the Office of Management and Budget, resulted in personnel cuts, according to Roebuck, including the elimination of the executive assistant to the director position as well as the grant program coordinator.

To date, the agency has lost a total of 18 positions from fiscal year 2011 through 2017,” said Roebuck. “This has put the VIEO at a disadvantage, where key initiatives are directly impacted due to inadequate staffing leading to delayed implementation and increased costs for contracted professional services.”

In addition to the general fund request, VIEO also anticipates receiving some $400,000 in combined federal grants, representing a $214,000 State Energy Program grant award and a $184,770 Weatherization Assistance Program award.

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