ALC-Executive Subcommittee

Executive serve greater legislative council to order first up we have a consideration motor the fna mister bargaining and sector hudson they all come forward. Please identify yourself and you are recognized present. I have no mischairman good afternoon membership committee jim heads and secretary DFA. Good afternoon mr chairman members of the committee paul gearing with dfa mischairman I thought I just needed to do real quick introduction of count while we're here day then we'll turn over to paul and let him do more detail walk through other proposed emergency rule I think it's been discussed in the piper little bit this week but you know I became aware that there was an administrator practice currently in place at the dfa. In the administrator practice basically said that an individual could come into the revenue office and change the indicated gender on their driver's license with both no questions I asked and as I looked into this administrator practice found out it had been employed settings and twenty then and asked more questions about how been put in place what the background was on there there was very scanned evidence as to what the reasonings really were behind the policy and a complete absence of any formal process to seek legislated review of that proposed parliament so that policy was in place and in accordance to the administrative procedures act. And as I reviewed it became pretty clear to me that one it was really not awfully authorized under the apa but second was inconsistent with the existing statutory law industry a good common sense public policy as well so we have already implemented a recision of that existing policy but we're bringing this proposed emergency rule to you today so we can really delineate the steps that we're going to follow going forward in order to be able to validate that someone's gender is consistent with the underlying identity documents and so abandoned will turn over to paul and let him walk you through the proposed rule and i'll be happy to take any questions along with him out to that presentation go to your word law you reckon I think because the way you started prestige the number going to ask your question now can you walk us through why you think this is justified one emergency rule versus just propagating a permanent rule to take that place and I think you pretty well did it but I want to explicitly name the reasons sure so because we have an existing number of individuals who have been issued identity documents drivers license or state under that previous policy those will be coming up for renewal and every day there can be somebody is coming into the revenue office to renew that existing license we need to be able to have the authority to ask them to present you know out the revenue office there burst have get nor an order for us to be able to validate what their gender is and I think i've been informed at least as recently as yesterday we had somebody can't be to one of the officers seeking to be able to do that. Mister thank you mister chairman under arkansas law a driver's license has to obtain certain criteria and information that will be displayed on the license which in include the full legal name of the licensee licensees date of birth address of residents the signature of the licensee as well as the person's gender the identifying information that's can't contain in a driver's license is utilized for a number of purposes which includes law enforcement for voting for travel conducting financial transactions obtaining insurance as well as health care services among other their important uses. As secretary hudson mentioned we have revised that existing policy earlier this week but the purpose of this emergency rule is to to provide the the procedures that are going to be necessary for those individuals that are going to be coming into the state of arkansas for the first time getting a driver's license for an identification card as well as those individuals that have been previously issued a driver's license with the exgender identifier contained in the person's license what the proposed emergency rule will do is going to require that a driver's license or id card it's issued by the office of driver's services the gender information on that license will have to match the gender information that's contained on the person's passport or certificate or us department of homeland security document the proposed emergency raw would prohibit the driver office of driver services from issuing a driver's license or an id card that has an x four gender information or leaves that gender information blank also and the we will have to correspond the either male or female gender information on the person's identity document which is their birth to get their passport or their homeland security department to state the exact same information on the driver's license or I decar this issue to the person also we in the emergency rule we have a procedure for an individual that would like to change their gender information that's contained on their driver's license or identification card so they will submit a written application to the department but also they will have to provide written proof that the the person's gender has been a amended either by the office of arkansas department of health or the vital records office of another state or another governmental organization. The role also will authorize the department to for any of the licenses or id cards that have been issued with an ex gender information previously which is about three hundred and fifty for driver's licenses about hundred and fifty approximately four id cards will allow us to review the bur certificate passport or homeland security document that we have captured at the time of original license or issues of the id card and modify that x ginder information to what is reflected on the person's information that is already within our records work should we do amend the information on a person's record we will give them a notification by first class mail that we have made this change but they will not have to actually come in immediately and get a new driver's license or identification card the driver's license or identification card that would be in their possession would remain a valid card until time that it be renewed and but if it once we have made the change in the department's records it will reflect the corrected information as stated on the person's identification document. There's also going to be the circumstance that an individual might have a passport that has a x designation for gender when they apply for a new license or I decart in the state of arkansas with the proposed emergency rule would do is if that person comes in and applies for a driver's license or an id court and they have a passport with an ex designation or other identification document with an ex designation on a form that we will provide to the person they will have to identify on that or report on that document whether or not we should indicate male or female on the license or the identification card the proposed emergency rules provides that if the person does not complete that that document along with their drivers license application the office of driver services will not issue the license or the id card we do intend to follow up with a a permanent rule for this specific purpose we'll be happy to answer any questions of the committee. It just real quickly too adwater myscurrent explain you know when we began to look at this last fall one of my main concerns was to make sure that we structured a process that was respectful to tort individuals who came into the office there we really minimized the need for intrusive questions by state employees and we want to treat your body with respect to comes into our offices and so really rely animal source documentation I think is away for us to you know deliver services and and most respectful fashion possible so it was a concern of ours and without as mister gering so we have taken questions. Thank you limit go to members first or any question from members. Uh if not believe representative my colour are you one thirteen or fourteen. Okay you're recognized thank you mister chair and II do have quite a few questions so I understand if you need to cut me off at some point and let someone else in and I can come back i'm happy to do that i'm good afternoon mr gearing and secretary hudson thank you for being here state code says there has to be imminent peril to the public health safety or welfare compliance with the federal regulation to do these emergency rules and I know sector heads in you have said part of this is to keep community safe and to prevent fraud. I guess my question is what what is what is the imminent peril that were that were facing with with trying to change this rule and if there are any issues that have arisen in these fourteen years that we've been doing it that the way that we've been doing it. Um. Because II think we share information with ncic and ACIC and all of those organizations has there been any specific issue that's come up regarding I think when it send the newspaper or five hundred and sixteen individuals here in the state. Yes elaborate on the father and sixteen that's five hundred and sixteen individuals who have an x indicator on their driver's license the population of individuals who have come into the office and changed gender from mail to female or vice versa is an unknown number we don't know who that population is how many in there are so certainly number of individuals who have an rd there's not based on verifiable information is north of five hundred. So in terms of you know whether or not there are being any issues we're not law enforcement agency so we don't maintain the records about law enforcement issues that may come up I will tell you that as we were looking at this issue I had conversations with members a law enforcement community just to ask or leave an aware of this existing policy by definitely and they were not even aware of it so in the sense of you know it is a document that law enforcement reliance upon if law enforcement cannot have confidence that it's a validly issue document that gives them information about the person in their encountering. I do believe that is a public safety issue and long first members I spoke with would agree that as well. I follow up mr. So i'm i'm wondering if also in some ways this doesn't so more confusion because if if you're present for enforcement officers presented with documentation that is completely different from the way someone is presenting and relieve it seems like that this is also very confusing I also wanted to ask about the passport one of being one of the underlying documents you can use to get a driver's license and I know on a passport you can also have it so we would have conflicting information on our arkansas average last since the versus passport sure. Yeah I think on this issue there has been there is much confusion this is listed say that so an individual may or may not present physical characteristics you know just a surface level that are consistent with an identity that they have. But anatomical differences they they may be consistent with what they're biological sex is. So there is potential for confusion under the existing policy. That someone is still biologically a male for example still has the ability and has to strengthen a male compared maybe to a female and a law enforcement officer is having an encountered individual they have a driver's license that says this person female wouldn't factor actually a mail. And so i've for me I think you know being more consistent with walk the reality which is this person is a biological mail or biological female is a safest round to be on for public safety purposes in terms of the password lip paul respond respond to there we do have provisional deals yes a representative but we how we have addressed the dish we were aware that the state of usda department had permitted I believe beginning in two thousand twenty two that passports could be issued i'm with an ex gender information at for the holder and a we had to provide and that's one of the reasons for having this provision in the emergency rule if an individual applies for first time license where id card in arkansas and that's going to be their proof of lawful presence is their passport with the next designation we had to have a procedure and placed it to address that customer's needs and what that how we are dressing that customer's needs in the emergency rule is that they will complete a document that states whether or not and they would like mail or female to be indicated on their license or id card and then when that license ridiculous is issued subsequently in renewals it will bear that same information now that person can certainly come back and provide additional documentation in the future if they want to change whether it's their original burst certificate or an amended by certificate or other other type of identity document it's is acceptable but we did have to when the main reasons for if we as we withdrew the policy or revise the policy earlier this week we had to have a procedure for those individuals that were going to come into the state of arkansas as first time licensees or id core holders. Okay mister chair if I can just have one more please to do one morning we've got two hundred thanks sir. Um so I think from part of what i'm hearing is that there is a feeling out there that there could be some danger but there I didn't hear any specific issues addressed but in the next question and want to ask about a group of individuals who are born interstates. And are not necessarily may may be ambiguous as far is there their sexual organs i'm wondering then. What what what choice that they have as far as is that goes because part of what is the question nurse is is is this role based on the best reasonably obtainable scientific technical economic or other evidence or information and scientifically there are intersects individuals and then they're not allowed to maybe be who they are born to be that they're they're having to choose so if you could address that please it's representative i'm so and we were do not research for and we were discussed that particular issue and so in our research we will be were able to determine was in the state of arkansas if there is a child born intersects then the there will be a mail or female gender sex place on the burst or timit now there may be a circumstance over time where the parents do designated or the physician designated at the time on the burst certificate that this person or child was designated as a male they can then go through the department of health and let's say it is that child grows up and wanted to instead live their life as a female they can change their their birth certificate from the original designation of mail to to female and vice versa so as it sits right now they the emergency rule contemplates that dfa is relying upon the documentation that's contained in the certificate amended by certificate passport or homeland security document merely for the purposes of an art issuing that personal license or an id card if that person wishes to change that information on that's on their driver's license they would then go back to their vital records office of their of the state of arkansas or the state or country that they were born and take the appropriate steps to modify that information and then they can present that to us so that we can make that change. Within our records and on that person's license or idea anything just really piggy backing on that little bit in terms of scientific evidence I think it's a great point you know that the current policy that was rescinded you know basically said no questions I asked ok so that I believe that's air I think an error they'll also want it to avoid was putting dfag into a position where it was asking questions that it wasn't really competent to validate the answers for so the policy that we have that we're working on partly per proposed emergency room is to really rely on that state agency that is vested with that scientific in your responsibility and in and knowledge which is department of health and also insurers that are drivers licenses are sinking up with other vital records that are maintaining about the state so what is on the driver's license will be consistent with what is on the bursting we don't have conflicting records in the site of arkansas thank you for that I would just have to disagree some because I think these individuals may not always. But giving them a mill and female choice is not always I think the only way in the only way that they they feel and I wish that there was a choice or so immerse certificates but but I understand that okay thank thank you mister chair thank you centre tucker. Thank you mister chair secretary husband mister gearing a first just want to follow up on. Representative ward law and represent mcco on the nature of the emergency because that's why we're here in the executive subcommittee is because this is an emergency rule. Now I think we can all agree that there's a cost to the public for implementing an emergency rule because where limiting their ability for public comment and that's why it's AAA higher standard is required and that standard being imminent peril to public health safety and so forth is that is that fair certainly a subject to a higher standard yes yeah. So if we're here for an emergency. And this policy has been in place for fourteen years and the explanation is because of eminent peril the public safety my question is. Over fourteen year period if it's an emergency now over fourteen year period i'd like to hear the examples that we have where this has presented a threat to public safety and i'd love all the examples that you have but i'll settle just for one in certainly if it's an emergency now after fourteen years we have at least one and then the the counterpart to that is whether that is worth the cost to the public of putting this in an emergency fashion rather than as a regularly promulgated rule so I wouldn't know that mr gearing answered if he if he has a thought on this I don't think the standard years there something bad has to have happened already. Okay I think part of the standard years were avoiding something bad potentially happening in the future. And in I do believe in and the art were making years that risk exists that you know when a law enforcement officer is encountering somebody in a traffic star we need to give them as much information as it's helpful to understand who they're encountering in a the driver's license does not exist for the benefit of the license holder. It's not a platform for speech. It's not a platform for personal identity doesn't exist for that purpose. It allows third parties especially law enforcement officers to look at the information and determine who is this person who is in front of me right now and so do believe that there is an appreciable risk for a law enforcement if they don't have accurate information it in terms of weathernet something bad has happened i'm not aware of any reports that something bad has happened but as I didn't care to represent my call that's just that day that we maintain it definitely we're not all on forced me agency I don't know what those examples might be that are out there. You know if we had a new policy in place the perspective form I would accept that explanation but but if we've had something in place for fourteen years it seems to me that if it's it's really an eminent thread the public satellite would have had an example but but i'm glad you raised the issue of accurate information to law enforcement that's part of the justification for this emergency role correct that is so in that case some i'm wondering why why are we focusing just on gender because there's other information on a driver's license which people also self identify their eye coloring people can work contact lenses. But also there they're height in and their weight I got my driver's license renewed a month ago and I didn't recall cna scale or a lie detector test there and I would be willing to wager that a number of our cancers may shade a little bit on that the answer to that question when they when they give the answer the driver's license so. If we want law enforcement to have accurate information when i've you know I support that idea then why we focus just on gender and not all of the information on the driver's license or again I would say that in terms of I color that is objectively verifiable now if they have contact linsons and transcurre something or as someone is coloring their hair there they're taking an affirmative step to be able to change their characteristics but it doesn't change the fact that my hair although you know consultant paper now at one point time was indeed brown and it is rucking brown I think on my driver's license as well. People do I think provide inaccurate information on their driver's licenses from time to time does that make that right. And I think it is a easier to detect some of that then it is an individual who's something as a fundamental characteristic as gender. Yeah I think society for a long time has segmented gender between male and female and we are creating I think a little bit of a of a question market confusion especially move in to bonn in terms of what an individuals identity years because of someone in downfound his binary it may not change their manner of dress. Their manner of dress may be gender ambiguous. And so it provides somebody objective information who's encountering the individual in order for the purpose of verifying their id who that person is given the most accurate information passport and I could if I could also add senator is that so the general assembly to your question why we're focused focusing on gender in this particular proposed emergency rule is that of those specific criteria that are required to be on a license including though your full legal name your date of birth your gender in your address the general assembly has provided a method of how you are to change your legal name on a driver's license we we cannot just merely rely upon what the person tells us their name is we have to have a court order named change a marriage license divorce decree something of that that we can objectively rely upon regarding your address you know we there is a specific law enforcement purpose and dfa purpose for knowing what your actual addresses so we can send you now so law enforcement knows where where you live so banks and other insurance companies know what your actual addresses so how do we verify your your proof of address we we receive information off of your source documentation and your utility bills etc but what the general assembly in an acting. The dispositive statute did not define how we satisfy that requirement of gender to be stated on your driver's license or your id card and over the years as the as we enacted that decades ago that requirement you know our practice has been whatever is on your birth certificate or your passport or your home and security document that's the information that we entered there was a departure from that in twenty ten where we allowed you to make a change without any information or documentation we also instituted the availability of the other x. So demonstrates and answers your question on why we're focusing on gender here is because that's that's the one area that we have an obligation to comply with with the statute but there is nothing in terms of our rule making or definitions in the statute that tells us how we are to implement the requirement that gender be stated on the license it it on their point and maybe we haven't been as clear on this as we probably should have been the initial policy that was implemented was solely focused on changing for mail to female or vice versa it was a few years later that the x indicator was added to the policy there's even less documentation about that approach. My concern is that is actually a department a state government really defining the public policy that is not an appropriate thing for any state agency to do. If this general assembly wants to meet in past the stance you that adopts the binary perspective and says that all the state is she documents must conform to that then this department will you know go with what state while it is I don't think the government we supported that but that's the process if we want to go down that road in terms of public policy it is not the process for a state agency to say what it wants in the beginning to implement i'm not going to do things that way. I understand what you're saying mr gearing one more question is sure thank you I understand what you're saying mister gearing about what's in the status what's in the co but also I just have to accept the department's explanation for the emergency nature of this rule on its face as to what you will tell me and what you are telling me is we want more unfortunate to have the most accurate information possible when they're presented with a person and to me there's no distinction between gender height and weight on the hand and which are obviously also objectively verifiable measures. But my last question was hearing you know you just run up the the passport issue in a confess to some confusion on this. Because at one point in your testimony earlier mr gearing you testified that. We want the driver's licenses and arkansas to be consistent with the information included on passports correct so there's two points of confusion number one you also testified that passports allow for an extessing nation and arkansas average license if this emergency room was password so in those instances they will not be consistent with one another that would be doubty correct and in that circumstance in that's why in the emergency role we contemplated the and that the person that presents a passport or other identity document that has as their sex will gender that the applicant would have to complete a separate form to provide whether or not we were will be putting male or female on their drivers license I understand that but but they won't be consistent with each other and but the really the the bigger source of confusion is my understanding is that you can get a passport and you can change your general designation on there without a changing of our certificate so it makes me even more confused as to the the basis of this role because the person can can just go get their passport changed and then go to a revenue office and say a. I would like a driver's license consistent with my gender on this passport and so what what what are we even doing if that's true. Will certainly what we are we have an approximately two point six million drivers licenses half a million of state issue identification cards and we have a a population of approximately five hundred individuals that have chosen x we try to implement a policy that will work for our offices so that weekend process the documentation that the applicant presents to us but at the time of their licensed or receive an id card we certainly understand that. Of the fifty states and although the other countries of individuals that we receive identification documents for we have to accept what is presented and we have to have some type of procedure to deal with it so in a perfect world we would love to have all fifty states and all us countries have the same standard and policy but we since we are done there were going to be a record holder we have to have a policy for those documents that come in to the state of arkansas and provide a method for us to either put mail or female on their license or id core in one of those policies is you can use your passport to determine your gender drivers that's correct yes. Soon to urban euro regulars and in central hammer thank you still on those lines of questioning about the definition of why we're here today for an emergency subcommittee meeting an emergency role review as separate and apart from the gender issue is the concern that I have that you laid out in your opening comments that this occurred in twenty ten three administrative process without any legislative review and that it's not authorized lawfully think that's for your words and that it's in conflict with the existing state law so imminent per all to public safety. Is what is at stake here for the ability to rule on an and an emergency rule or is it not imminent per all to public safety if we don't have clarity in our laws and for our government agencies through their administrative processes to abide by the laws of the state of arkansas because if df and a decided that x was acceptable then why not see or why not a or why not be but if we have agencies that are going rogue and determining public policy without going through this legislative body in this legislative process. Then that absolutely could be imminent peril and public safety. Yes maybe we get no discretion from me on that point in in particularly on I guess the the x indicator you know x is essentially saying i'm not going to answer that question. You know and the standards the state of arkansas say that she must indicate your gender mail or female as well statute is. And we had an administrator practice that said were not going to do that. And that's unacceptable and that's why if you know garser what the united states. Choose to do on its own any documents which i've got concerns about and got questions about you know we can't follow that designation because arkansas state law controls the issue of arkansas drivers licenses and we are an arkansas state legislature abiding by arkansas state laws which is an appropriate place for us to hear this rule and and accept your rule as proposed thank you ma'am. Thank you so to hammer reckon they can share you may said it not just overlooked it but what got this above the radar screen after fourteen years. So as I came in the office which is last last august part amount of onboarding process was to set down and walk through or with all the different divisions clean the revenue division you know just the current state of things. And asking questions about our policies and practices this came to montension and you know the meet response was just to ask more questions that is my natural how long been doing that why are we doing that you know having been in state government having done you know plenty of rule making I want to see the underlying file as to you what led to that policy because I had policy questions about that is that the right policy for the state of arkansas and again all I got back was I think about two two or three sentences of an email that was a some totally administrator file which led to a lot more questions on my point and so as we talked about it more you know can empty on conversations with mobiles you know we thought that was not the right policy for the site of arkansas she was very clear that was not the policy. And so what we want to do was work. Quickly but also competitively. To define what the next process should look like in a way again come back to it respectful that we weren't just kind of just very quickly implementing something without thinking it through it may not be the perfect process but it is an improvement on what was there and in more so I think legally defensible. If we were not in the emergency road come through the regular rules process which is the committee that our culture with and it will happen and it will yes and and they'll be up to it is there for for comment before i'm i'm sitting here thinking the timeline of which if it went through the regular rules process you wouldn't be through and before our committee say what probably july august stuff like that you have dependent on what your schedules are and you know how the calendar lines are certain windows so it's listed middle of the summer okay coz when i'm thinking is introducing law enforcement when i'm thinking about is getting valid ideas out there that are going to remove anything as far as pole workers when people show up to vote and present their id I don't want to poll worker I don't want anybody should you talk about state age so something about some of the volunteers in the general public there may be subject to that if the single delayed and with the important election we got coming up at the fault would you otherwise as an agency have time to react appropriately in timely for what's coming this fall as well as other matters it would it would increase a little bit of the the sweat factor listed say in terms of discount doing the work but while someone be very clear this committee the existing policy is rescended i'm not bringing that to you today for you to approve the recision because you never approved it to begin with you know it was administrative the issue policy I have rescended it the emergency room creates a process so we give clarity to all of our customers and our employees about how we're going to handle this issue going forward in the absence of this emergency rule there's gonna be confused well and that's that's part of primary point you prescended it it stayed because you had to resend it because of the illegitimate nature of which it was put in place is partially what constitutes the emergency being before today yes or otherwise we're operating with with confused and that works been used a lot today there I could go somewhere down a rabbit hole on that one but. That this is what's going to clear up that confusion in the interim until it can get before the regular rules process yes a fair assessment it's it's a transition policy force let us get to where we need to be thank you like with sure. Uh playing lately that you want to learn you're recognized. Thank you mister chairman well thank you for bringing this to us is really interesting to me and I think there there seems to be confusion on the eminent peril of this and there's a lot of areas that we could go to to discuss there but let me just focus in on law unfortunately I think there is an imminent peril when a law enforcement officer cannot totally identify a person and let me give you an example of why that's important. You know as we set here there are probably hundreds of law enforcement officers throughout the state of arkansas that are walking up to a car and they have no idea. They have no idea I may have police officers work for me they don't know who's in that car they don't know what's in that car. They are basically putting their life on the line so we need to give them all the information I would like to see more information on the driver's license so that that person walking up there can identify who that person is no intera and escaped fell on or whatever and they can go back bear for the records and they can they can do that they can compare that so I think it is an imminent danger to those law enforcement officers and you know I believe this were important and it's if you ever read the news you know that those officers are an imminent danger and some of them don't go home to their wife and their kids so i'll try to find a question in there somewhere but I think it's the right thing to do would you agree agree. A membership have no other members own reps in mccolin will come back to you for short term. Thank you mister chair so I just have a question now about the process because I guess from what I understand there will be a permanent rule of interest being put in place and so can can you explain first of all how people affected by the emergency rule how they will be given notice or heard or anything and then with a permanent rule from my understanding there will be a time for public comment is that correct we're just kind of taught me through that process that's correct and so I think to of all the comments that we've made regarding the imminent peril providing within the emergency role the procedures that will be in place now that the the twenty ten policy has been rescended so if an individual would like to follow the process in the emergency rule to change the gender information on their license they will present a one plate page application that lays out them their request to change their their gender on their driver's license or identification card they will attach to that application there documentary proof that shows that their gender has been changed on their birth certificate or other either their original or their amended birth certificate we will consider the application and then notified them whether not it has been approved. The other issue that will will be coming up in the proposal as those individuals have the ex designation on their license or id card if we are able to ascertain within our records that we have captured a a percentificate passport or identification document that has their sex or gender on their and we will make that change to that person's record and then notify them by mail that we have made the change to reflect whatever their birth certificate passport or homeland security document states that they'd provide it to us at the time that they were regional license to or receive their id card and so at that point they can either come in and get a new license or a decard as a duplicate and pay the appropriate fee or they can just wait until it's time to renew and when they renew they will be able to get a new license with the corrected information they also can if they would like they can also provide too worse they can go through the application process to demonstrate that there has been a gender change on their certificate or other document and go through that process as well but that's why the emergency rule is presents that imminent peril if we would not to have it is we have to have those procedures in place for those individuals that are going to be coming into our revenue officers wishing to make these changes and then what about the permanent rule in public car man can you all address of course so we of course once we were already receiving feedback in the form of questions from the public as well as the press we will go through the ordinary promulgation process which will provide a period for public comment as well as a public comment hearing so that we can hear more about how best to implement and frame the permanent rule because we all as much as we try to have four sight to address every single circumstance that might come up. We we understand that we're not perfect in that regard and that we want to make sure the through the public comment period that we can receive as much information as possible will also mean I was doing the public notice as requiring the apa but my community to you as well also put it on social media so that folks are aware of when we're doing the hearing something they will show up show up and provide a common person to be able to do that. Central turkey do you have a quick one quickly I just what I wanted to ask you to explain mister I just want to follow one then numbers because I heard you say three hundred fifty drivers license is a hundred fifty status you'd have these and i'm curious what what that was in reference to because I heard secretary huts and say that there's five hundred and sixteen worth of next but we don't have it at a number on how many may have switched and so III really just want to get the best handle I can on the number of our hands that are affected by the senator so those are those are numbers to three fifty approximately when fifty for the id those are the individuals that have been issued a driver's license or identification card that is a current licensee or hiding card holder and and they have an x designation on their document now in individual under the twenty ten policy that came into arkansas got a license or an id card or a preexisting license or id card holder that came in to dfa no questions asked no documentation required that change their gender from mail to female and vice versa that is an unknown number we don't know how many of those changes were made so when you said the three fifty and one fifty earlier those combined where the five sixteen number x okay and you don't know the sir. Okay thank you per not turning or questions executive committee members without objection to the proposed mercy rule is reviewed in a proed in the review that approval shall be effective upon adjournment of a lc meeting proddy march fifteenth twenty twenty four thank you thank you committee members next we have presentation by miss geother. The single group per contract. Mr field recognize yourself. You will recognize yourself thank you mr chair jill there bureau of legislative research patrick client was signal that you can present so you all have in your packets in front of you. A draft contract between the bureau in seagle group currently the bureau has two separate contracts with the signal group for a various am consulting services related to health benefit plans of the state and because it is the will of the general similarly to continue to utilize signal for various purposes we felt like it would be more at clear and expedding to consolidate all their work into my contract so that's what this does and the first page less out the services that they will perform they'll continue to provide for school impact statements on bills regarding health benefit plans any consulting work related to the program including working with your oversat subcommittee on its diabetes study and the information that they provide to the education committees regarding the pse plan and then this allows anything else that you all require that does pertain to the health benefit plants particularly. If you'll look at the second page this contract the term would begin tomorrow if legislative council proves it then director gary would sign it and mister and mr clan with sorry patrick m will sun as well and then it will continue through june thirtieth of twenty twenty five this provides that we would then be able to do renewals with them if that's what you all decide you want to do on an ever on a buy any old schedule just like you do with your retirement actuary the fees you have a fee schedules attachment a here that shows the hourly rates we would be charged by siegel and the maximum contract amount is five hundred thousand dollars. I would be happy to answer any questions single urban you have a motion right so. I won't give a little lead way and go to san francisco for a quick question since he's not a committee member for me thank you share appreciate that real quick question what is the liability against sea goal in the event that they provide any advice or direction that we will utilize only to found out later maybe they were inaccurate in their determination the information they gave us a reliability they hold i'm not sure that I mean as far as liabilities would you take them to work over that as the question they are asking i'm not sure I guess that's what my asking is if we're going to hire them to give us. Direction if I understand this correctly and we make decisions based on what they gave us but later we determine you have your staff gives us bad information that's a personnel issue if we're contracted with so it gives us bad information if inaccrator we determined it not to be in the best interest. What what's their stake in the game that we have recourse to go back here we just have to fix it I think that usually and always when we deal with the consultant unless we could show that they deliberately lad to you for some reason and after that you'll have any amount I don't know that you would have any any recourse against them under this contract or a thank you miss chair for lately soon to a renewal recognized. Thank you mister chair I moved that we authorized be a law to terminate that you existing contracts with the single group and to enter the general health benefits actually and consulting services contract with sick or presented today upon approval of the legislative council at its meeting friday march fifteenth twenty twenty four saying the more questions I have motion circuit from culture ward look the other question not all those in favor posed it is about thank you thanks. Next up we have mister roy raglin. With strack and welcome please state you name and who you work well I two percent. Roy raggling cheap staff house thank you missed chairman maybe. The request today is for the house to representative to. Use blowers for a twenty four were end twenty five committee room appropriations. And the phones be used purchase equipment and suppliers to enhance a security. For committee rooms AB and c. Here here in a mac bill. Thanks give me. And the house is working with blar that sector states office arkansas building authority and the attorney generals office de enhanced the security of the. A big mac better protect the legislators in the staff and. Other state employees as well as the public who frequent his bill and then. With that would be open request. We have a question. Okay not to equation ripping more though I make a motion to approve the request since the request for benefit all legislators think is that adequate requests with that mystery and make a motion to prove you have emotion tender urban own favorite I post it is not quite mister raggling I just wonder now it feels to be at that table since you're technically I guess close to retirement now and it really been a while since you've been to alleged table feels real good. Thank you. Send to urban you recognize this representative or law beat me to it but. Mr raglin is also my constituent so I just wanted to wish him a very very happy retirement we left your way and you've just been a fabulous person and we just love you we'll do something else to improve he's going arab next year we have the edgation simply property interest study if mister lee lambert then morgan for matters adams and lee insurance welcome back with or let you do you formal introductions and you're recognized president thank you for being here today. Robert sleeve with matters adams and late commorgan matters only clinton lambert matters aren't something. Okay good afternoon nice to see everybody. Really good to be coming to the earned and and two are conclusions and so what we have for you today is really going to be an overview and i'll try to get through it as quickly as we can but a no review of what our final report is going to say the first observation that we have is really just that large property schedules and several years ago when I got in this business but twenty five people really started combining large groups of property and were able to achieve better rates lever economies of scale in provide you know a shared limit with a kind of create a small insurance pool and it was great for the clients that they were able to do that for and it provided great rates for the policy holders so the way things have have gone the last several years all of the things that we've talked about the capacity that's available for these large schedules of insurance is really become so expensive that we believe there's just a paradime shift that's occurring in our business right now. So what we currently have as we have three different school insurance programs and they're they're not different than any large property insurance schedule they're all competing for the same limits from the same pool of insurance companies. Uhm the way that their structured today there's three different three different limits that are there in the highest one is seven hundred thousand seven hundred million and so they're not as high as they need to be so what we're doing at the moment is we're currently purchasing insurance the way that a consumer purchase insurance not purchasing it like an insurance company. And there is a fundamental difference between the two when you purchase insurance like a consumer you're purchasing it for known known claims. We've been through this several times this particular slide it just shows you what the limits of insurance are and it shows you that in northwest arkansas there's seven billion dollars exposed in cater twelve and higher ad and there's twelve billion exposed in central arkansas so the limits that are available the way it's currently done is about twenty percent of what a maximum probable loss might look like inside if if we had a really really bad day so that's the came an issue for us and made us recognize that not only where we hear specifically because the growth and premium and the cost to the schools but then it became an issue that hey we really need to look at how we structure this so that we can get the limits of the insurance to where they need to be in case we have a catastrophic event this line that you're looking at here I i'd move quickly to their iters as lost ratio combine laugh ratio when you agree all of the data. An insurance company's underwriting of fifty percent a loss ratio is the premiums paid versus the losses paid in so in insurance companies trying to underwrite to a fifty percent loss we have fifty percent sixty six percent a hundred and sixty and then you see what what happens so if you're an insurance company in your looking at this what are you gonna do you're gonna raise your rates and honestly based on the experience there the rate increases are somewhat justified so that really tells you that we've got a look at this in a different way if you look at the barchard the bar chart shows you the premiums and shows you the losses and it just shows you that the losses have really out paste the premiums so you can't expect for this to do anything but to continue to go up. One of the things that we looked at in our study is we really wanted to just try to figure out where the losses were coming from I think the the reality of it is in the state of arkansas you have property they're going to come from everywhere. But one of the things that we found that was interesting and we really thought if we broke this down by conference like football conferences or something that people in the state understand it two a three seven a and if you take a quick look what is going to show you is is that the two schools on average are paying fifty percent more in rate than the seven a schools and their pain that for as a smaller percentage of the limit of insurance it's being purchased so if you have a fifty million dollars school and you have a five hundred thousand dollars limit of insurance the two a scores pain you know for ten percent of that need but they're paying a fifty percent higher rate so when we looked at this and we looked at the recommendation we're going to make there there's really three things that that need to happen here and one of them is we see this is an opportunity to clean this up. We think that if we're able to achieve a rate that compass some savings on to the seventy schools and then more even more to the three a and two schools that might give the two and three a school some money to reinvest in their schools and help protect from some of the claims that have they may have occurred for freezing pipes or things like that that are preventable so we got excited by the idea that by building our own insurance company and providing a blanket rate that there was an opportunity to really do something for some of these you know some of the poor schools in our state and we we think that's important and that's something that were really glad that we studied and looked at in addition that it would tell you that the school that's isolated that's a fifty million dollar risk with this paradime shift that we're facing in the insurance industry right now is really not what's driving these rates it's the twelve billion dollars of concentration in central arkansas that an underwriter looks out and says. Yeah i'm gonna have a claim there you know there's just that much more potential for me to have lost and that's what it really changed in our in our industry. This is just in there just the rate dispersion in it just it's a scatter spot a scatterplate in addition shows you that. You know the smaller schools if you look at it and you look at the the median and the of both the limit and the rate it shows you that our smallest schools are paying the most as a percentage for their insurance. The. So what's the cost of maintaining the status quo to keep doing what we're doing. Well with increased costs of construction frequency severity of storms and these have led to a paradine shift in our market that we've talked about. Last year there was ten million dollars invested to subsidize school insurance premiums that same amount invested over a ten year period to conservative four percent return wouldn't. Almost create the capital that's needed to capitalize an insurance company that the state could earn and provide an insurance cover to these schools. Uhm what's the cost of remaining under insured. You know the wrong the wrong storm happens this weekend I think it's pretty volatile of you know today gets on the ground runs up from bomb walker statement stadium through favorable high school past donald renewals raiser back station on up to springdale high school it's billions of dollars billions same thing if you go to get your google earth out go take a look at better and bryant. And draw that line and draw it straight up to north literally high school and it takes you right through and write through UA m pretty scary pretty scary to think about so not taking action. Is leaving the political schools exposed to to catastrophic loss so you'll see that our report is going to recommend to take action now. Knowing that there's a paradine shift we can't do a different version of the same thing and expect positive results so we think should tear it down and build it back from the ground up. Insurance premiums what's going to happen in this district shows you quickly swiss re estimates a five to seven percent annual growth for cat exposed property. I'm sad to tell you that in the last five years arkansas been known and become a cat exposed property state. We are on the radar of every insurance company that's out there as a state that sustains catastrophic loss. Um so far to seven percent growth in premium over that time if we do nothing. Runs out to hundred and thirty million dollars. If you have an insurance company and you have premium growth it's held by levers that you can control which will get into in a minute you're able to flat in that line out in control the premium growth. This is a really simple slide what it shows you is it shows you in an insurance program and insurance program is an expense that's money you spend. That's money that is given to the insurance companies and you never get that back inside an insurance company when you retain the risk. If the claims don't come then that company creates a surplus and it bills and it just shows you that it's an income producing assets so if you capitalise it the right way with the right amount of money and we're going to talk about that you're going to take an assistance in your right pocket you're going to move it to your left pocket in his gonna become an increase in income generating asset for the state. Uhm but the big thing is it just shows you that one of them is a depreciating asset they eventually goes down to zero in the other one accumulates and grows every time. So how do we regain control how do we get the limits of the insurance that we need. And do it for less money. We're gonna have to shift what we're doing we're going to have to move from operating a buying insurance like an insurance consumer and start purchasing it like an insurance company so what is there do it gives you control in an insurance program or when you're purchasing like a consumer. What happens is. The market sets the price the insurance companies tell you what they're going to charge and that's what you're going to pay. Inside an insurance company because you're retaining a larger portion of the risk then you were able to determine where you enter the reinsurance market. And that means that you get to set the price on what you are going to pay and then you focus on how much you're going to retain and you manage that risk. Uhm the cost explain that it's an expense versus an asset the values it gives us the opportunity to go from five and seven hundred million and values to two and a half billion we think that that's a good place to start to try to get to the limits of insurance that we need. Recent resources. Risk management is done a good job with valuing these properties last control and engineering that they're providing and we we know that this will be taxing on them but we do understand there's more minimum to merge these regardless of what happens with our recommendation. The. If we need to get people in the right seats on the bus in corporate governance is really really important when you're talking about the type of capitalization that we're going to recommend. So the risk of implementation doing nothing there's no no implementation risk if you don't do anything. If you do implement something different there is a high implementation risk but it's mitigated by the use of expert advisors. And proper governance so what we're going to recommend is something color special purpose insurance captive and the legislation is already in the in place to to use this arkansas a captive domicile if you look on the left we came up with a name for it we like it it's called the diamond state insurance company I don't have to use it but we thought it sounded pretty good. Capitalization is two hundred and three hundred million I know that a sticker shock for a lot of people on the ram but I will walk through this and explain it to you and again you're taking an asset the two or three hundred million dollar asset does not be common expense in there's no longer an asset we're going to put that asset to work generating the end calm to help the school solve this problem so it's going to create investment in we get a program rate I think you look back at the second or third slide it should that the program rates what those were on the schools where they varied it's going to create surplus and that surplus is what we're going to use to create to to to pay our claims we generate revenue inside our captive we retain our losses if we do things right we outperform our loss forecast then we're going to create serb of surplus income inside our insurance company so foundations. For the captive arkansas captive domicile there's captive legislation that time was passed in two thousand one in two thousand and seventeen at the end of twenty twenty two there were fifteen captives domiciled in our state. And there's the opportunity there's many more arkansas owned companies that have insurance captures that they own they could come back to this donors so we're excited about the idea that this demonstrates to arkansas businesses that they don't have to leave the state of arkansas to bring revenue back to our stay and are stay can lead the way by forming in some insurance captive successful elements for an insurance captive premiums collected from the schools and investment income and you'll notice that added investment income to this have to exceed the loss forecast in in most years over time for this to work. So your capitalization has to be sufficient to generate in investment income that will help cover claims and protect the captive. Corporate governments to pride provide checks and balances we believe is really really important specifically with this type of capitalization that we're recommending we want strong corporate governments with different different functions with on the board serving the needs of the captive proper valuation. In an insurance company proper valuation is critical you need to make sure that if you have a twelve million dollars building you're getting twelve million dollars of premium premium for a twelve million dollars risk not for a ten million dollar risk. And we need to focus on eliminating in controllable losses in outperform the loss forecast corporate governance the way that we see this would be set up with a board of directors in the board would be divided into two specific functions one would be risk control in inside any healthy insurance company one of the corner stones is to have strong risk control preventing claims. And it is every dollar that can they can be saved by preventing losses is going to stay in saturday insurance company in it's going to earn investment income and that is what we want to do so we have a wrist manager working on valuations making sure we're getting the proper premiums we think a id is doing an outstanding job with that already risk engineering loss prevention and claims oversight is where that focus is and the other side of risk control was then claims what happens only have a claim that claim being aggressively managed in to the lowest possible outcome so it's managed to right ways really important the other side of the board of directors is risk finance and risk finance in in in managing risk in buying insurance or two different thanks so when we set up our insurance company we would have a captive manager captive manager's key that provides the accounting the ordering the actuarial work in the tax work that needs to be provided to be in compliance with the state regulations into regards in regards to an insurance captive you have an investment advisor that according to title nineteen can handle the investments of the insurance company and there may be a possibility to outperform some of the stuff that's entitled nineteen and that's an important voice that sits on that board and then you have the reinsurance broker that's going to go out and place your claims over a fifty million dollars retention that board of directors we believe should report to the arkansas insurance commissioner in they should review an annual assessment of the insurance company retention which were suggesting should be fifty million dollars of claims should review the doctorables policy terms conditions these are all ways that we can reduce. Claims that are paid out should have have a valuation of sub limits for earthquake flood those types of things and then should determine the level of coverage how much coverage do we actually need to buy and how much can we actually afford so those are levers that we can call i'm on the next page if you move to this inside an insurance company there or a couple there's several different levers two of them were one time levers the first lever is the capitalization how much money are we going to put inside our insurance company what can we put in it. What's the date when do we put this into a fact we believe that this could be up and running in six months. Annual the captive retention of fifty million dollars means that the cat are insurance company which self insurer the first fifty million dollars of all losses. The potential rate break for re insurance really occurs right there in about fifty million deductibles charge to the schools and in our study we there were a lot of different deductibles in the different programs we just want to make it simple for everyone to understand we picked a twenty five thousand dollars deductible for everything for k through twelve a two hundred and fifty thousand dollars deductible for higher ed or target for reinsurance is too and a half billion dollars that's the limit that we're going to try to get to we continue to look at study to see if that's enough but there will be a point when there's only so much money to to spend and that we can use for insurance. Policy level terms and conditions we have margin causes percentage deductible social just examples of things that insurance companies are that inside our insurance company that we can use to reduce the losses that our insurance company is paying. In the the percentage of schedule to self insurer so as our company grows this is not a year one thing this is a year three year five year ten thing but as our insurance company grows and starts to build surplus and has reserves we can start to decide what we're going to self insure maybe we start to ensure a lot of this self insurer a lot of those two eight schools for every billion dollars of value it's going to generate approximately one point eight five million dollars in premium that comes back into our insurance company the way that i'll look at this as if we don't have we don't pay reinsurance on that and we don't pay losses on it that one point eight five billion we have some good fortune there that's like going down and it's like the the five point swing in a basketball game where the front end of the one one is missed and someone comes down and hits a three pointer so we hope hope that that can happen come. Any company to be operationally sound has to have a strong balance she. If you don't have a better strong balance she you're not going to be an operationally sound company. And the capitalization and capitalizing this properly is really really important and we believe that this needs to be done we don't want to be back at this table asking for a recapitalization of the insurance company. Has a little nervous to come in here as for two or three hundred million dollars but that's what the maths that's what the math telstra's. So having said that if you look at their socialists give you an example of how the insurance company would operate how the premiums are generated so if we had forty billion dollars in value in the art of total insured values in our reinsurance rate for two and a half billion sitting above fifty million dollars selfdashinsured retention it's going to generate a reinsurance premium of forty two billion forty two million dollars. We charge the schools eighteen and a half cents and you see that eight sent delta creates a thirty two million dollar surplus that goes into our loss fine. When you are an interest. On that thirty two million dollars plus the capitalization it creates the additional income that's needed to cover the forty million dollars of expected losses that occur inside this insurance program. Um. The current I think the current premiums are around eighty six million dollars so there's potentially ten million dollars of savings right out of the gate in doing something like this. If you just take it impact looking back the assumptions we have two million hundred million dollars invested in this model and it just shows you that if you start in twenty thirteen with historical losses in eighteen and a half cent program rate ten and a half cent re insurance rate in the thirty two million dollars that I outlined on the previous slide four percent return on investments at the end of that in you would have three hundred and fifty six million dollars sitting inside your insurance company that money could be used to. As paid out as a dividend it could be given back to the schools to reinvest in their property there's all types of things that can be done in the board of directors can make those decisions if approved by the arkansas insurance commissioner and do those things for the schools. If we started this five years ago when I think. You know I don't remember a worse time and weather than in the last five years in the state of arkansas maybe other people do but I can tell you it's been pretty nasty the last five years so even in those years you would be still looking at two hundred and forty one million dollars inside the insurance company impact looking forward. No one can predict the future no one can go to can predict what's going to happen with the weather this afternoon I know none of us were expecting the tornadoe that rolled through little rock about a year ago. Two hundred million dollars invested the same assumptions essentially you would be looking with a forty million dollar loss forecast in our study is telling us to expect somewhere in the neighborhood of forty million dollars for losses. In this depending on the structure you know the structure that we use for deductibles policy language those are things that could change that lost for cast but that's what that's telling us this would be protected by sideways insurance which means that fifty million dollars would be the max that would ever be paid out from the insurance company you'd still have two hundred and thirty one million dollars sitting in this account at the end of ten years. Relevance management we talked about this opportunities to keep money in the program you know what kind of property claims are preventable you know fire can be a preventable claim lightning you know how you ground buildings those types of things for some pipes you know we've had have had clients that have had flood losses we've done drainage projects you know help where they've done drainage projects which is help with flooding problems theft vehicle impacts people you'd be surprised how many people drive cars into buildings it's pretty crazy sprinkler leakage and those are some examples in the last ten years there's been fifty million dollars of these types of claims i'm not saying that the wrist managers didn't work hard to try to prevent every single one of them i'm sure that they did but those are opportunities if we can put our focus on that every dollar of that money stays in saturday insurance company it earns income and can be in a spent however we want to spend it with our schools precise building valuations I think I explain this example earlier it just you know explains that if you have a twelve and half million dollar building and you've got it on your schedule for ten million dollars in your only collecting premium for a ten million dollars building that that's a that's a problem so one of the other key things about risk management is the kids. Really really important he know we talked about all this and i've spent a lot of time looking at a lot of numbers a spend a lot of time looking at money but what's important here is the kids. It's keeping him in school to keep in their schools open what's the cost to a community when we have losses that we could prevent and we have that fire we have that thing that keeps our kids out of school. That's a it's hard to put a number on what that is and we think that's really really important and that's one of the reasons that we feel so strongly about the division in our corporate governance and then we're making the recommendation that we're making so. You know captain recommendations you're going to see in our report we want to combine all of this into a special purpose captive. We've gone to say a minimum of a two hundred million dollar investment. Our insurance company needs to retain the first fifty million dollars of all losses protect the capitalization was sideways insurance which means we have that fifty million one time. Place reinsurance above the retention up to two and half billion. Charge the school sufficient premium to cover annual expected losses are reinsurance costs reinsurance cost. In established corporate governments to create conflicts of interest and help produce the best results for the schools and we say act now. We can't recommend waiting have thought about this a lot the number that are worried about for a while was the capitalization number that we were going to recommend and i've quit worrying about that i'm really really more concerned about the underinsured amount. And the potential for loss of the schools by not dealing with this and pushing this down the road I think there's been you know talk about moving it out till july twenty twenty five and I just don't see that that serve something that we need to do I think if we can take action now it should what are the benefits this is going to protect the schools by providing controllable formal adequate sustainable coverage for the day and into the future it can't access to reinsurance markets one of the things that's interesting about an insurance company is in insurance company has access to reinsurance that's reserved for reinsurance companies. So there are some you know two hundred billion dollars in bermuda learn for re insurance for captive insurance companies exclusively. Controls a cost. All the rule all the schools should pay the same rate we feel strongly about that and this is an opportunity to clean that up a two eight school just shouldn't pay more than a seven a score that's our opinion it provides transparent responsible corporate governments. Immediately saves money we discussed that it's capitalised like an asset it's not an expense that just keeps going out the door and I think it's going to set us precedent for other states to follow really do. Uhm proper valuations we get the right premium for the exposure. And I think lost prevention i've have a lot of confidence in the risk management port minute a id in their ability to reduce the claims have seen the work that's been dine in I think that they're more than capable and have a strong desire to do that launching the captive. I think that these things need to happen in a sequential order to get the best result. I think that she selected implementation team to do this. There's a formation of your special purpose captive. Your wrist finance portion of your board begins operation. We mentioned in our report the state property the state property was not considered as a part of this study however it would be irresponsible for us not to point out that it's currently included in with the higher add insurance program which is they're both part of a trust. You know there can be some entanglements getting you know higher at out not really sure what those may be but we did need to point out that there is the the whole state property piece that sitting over there that would have to be addressed so think you're wrist finance team needs to work at that in understand that for inclusion or remaining on its own risk management is gonna have to take on the aspect schools that is a huge honor taking that is going to take a lot of time there will be need to be a strategic plan for that that's going to happen regardless of whether you move forward with this or not but that is going to be a lot of work and getting their arms around that building that plans can be really really important for the board of directors to understand what that looks like. In then your risk finance team will make recommendations on funding based on the levers that we talked about you know how much is that re insurance can a cost those types of things and then I think once all that's done then you find it in then you launch it so. The money could be airmarked a really done and know how that might work that's for your to decide but I can tell you that we've spent hundreds of hours working on this report it didn't really understand what public service was all about and now I do. Uhm. I'm honored that our firm has been able to be a part of doing this i'm very very confident in this solution that we're recommending to the state and we feel like that going forward whether it's as or whoever it is that sees this through that this is going to be you asked us to find a solution and I think that we found wine that's going to address problems that we didn't even realize that we're there in his sky allow us to take some of that state surplus and reallocate it in use it for good and I can tell you one bad afternoon and that state surplus can be gone. So i'm i'm proud of what we've done here thank you but you don't gentlemen for your presentation I know we have some questions just remind members were not taking action on this recommendation today there'll be some additional discussions but senator murdoch you're recognized for a question thank you mister chair in your own page eleven. And yet were you introduced to diamond's state insurance company so that the program rate that the point eighteen fifty is that the highest capitalized per square foot in the each district what would it be want per one hundred dollars is how that work value yes our value of a building so let's talk about that value building is determined a couple of ways depend on if you look at assessments from the assessor's office or you look at market value replace replacement cost value so what it would cost to actually the way that insurance policies are written they're written on a replacement cost valuation so it is one of the more challenging things that you face when you start facing in your dealing with older properties older schools those types of names it's what it would cost to put that building back with the exact same white kind and construction is how that all property insurance policies are written then that will go into a fine they were yield capital revenue so that would be the plus of the of of defined along with this capitalization of two to three hundred million would I come from where would that to to three hundred million we think that would probably come out of the state surplus. It says in august. We don't have it yeah I thought maybe I thought you had a package that if if we did I wouldn't be doing this study yeah I see a lot of pictures and pretty numbers I know program rate okay that mean I need I need to know what a program rate is so last question thank you chair for indulgement as we go over to figure out the premium calls per school district how you determine that we that's a twenty five no notice deductible was your premium cost so we're recommending a blanket rate for all the schools we're recommending that a change from schools being charged different rates and we're recommending an eighteen and a half percent are eighteen half program rate and a a school in southwest arkansas south east argument saw the insurance the exact same rate per one hundred dollars values of school so this it so this programmary is okay so the eighteen have said that i'm looking at there. Is the rate as a relates to the per district what i'm calling their premium you get program yet yes sir the the program rate is what's actually charged and that consists of the ten and a half cents a rate charged by the ring insurance company you got to see that breakdown she for that somewhere yeah page. So that eighteen and a half is the reinsurance rate plus the policy holder sure plus so you're then eight cents spread plus your four percent investment income on your capitalization is where you arrive at the claims paying budget wary on a college last four guests you said that low face for me breakdown eighteen halfs and a program rate show the eighteen absent program rates what's actually charged the schools and that's made up of a ten and a half cent costs for reinsurance so in the event that the. Fifty million dollar retention losses exceed that. In the reinsurance program kicks in that's what you're paying your ten and half cents so you charge an eighteen and a half cent rate to get that eight cent spread across your schedule of values and that pulls together you're thirty two point five million dollars policy older surplus and then you take that and you add it on to the four percent investment income that you earn from your capitalization you know if you have. Couple good years in a row you're going to have a larger four percent and if it's you know troubled years but at a minimum with the two and remained our capitalization at the least eight million so that tell you arrive at you know having enough to pay claimed for a forty million dollars lost forecast right so for a district to have this broken down to them on a prodistrict basis to know that if this is good or bad for them individually they and that's going to be important as part of this educational process as we move forward with your report with your recommendation each district will have to look at the air valuation and and in what they. What they have and go through this scenario because i'm sure this will be some pluses in mine is some good embarrassing aerials in this in this. Absolutely if you look on the the graph the scatter plot that we threw up give me pays them about six. So a block and a half from the left of that line if you draw line straight up and down that in eighteen a half cent program rate everyone to the left of that line every year to left online would pay more everyone to the right of that would save money in. In there being said we are taking the limits up to two and a half billion so a lot of the you know you people pay in more would be like colleges that don't get the limit that they currently need so even though looks like a modest increase there I think is like two since across the board on average for higher education they're getting five times the coverage because right now university arkansas has five hundred million dollars with the insurance in the football stadium cost four hundred and thirty five of that. You know so I think the other point here if you look at that scout apply and you really you know take the time to look at it to the left of the twenty sets across the bottom you draw that to the north I don't know what desert twelve twelve schools maybe twelve they aren't going to benefit. From this from a rate standpoint interestingly enough. All of the every all of the dots the red torge the bottom and the right of that line there's a small schools. They have delete they're going to benefit the most and they have the least need for these high limits so this is going to give an opportunity to to really not just get the the schools that need iro limits covered the right way. It's also going to give an opportunity to to give these small schools some rate relief. And I would guess that those are the districts that had the hardest time with the increase. I don't know that for certain but that would be my my guess and replacement. I'm sorry yeah I give you another follow up but we do have the members in the cube okay i'll get out jump out just so and in the the the replacement the the. You will be planning replacing the calls that's what a program write this out of the eighteen point one eighty five we are talking about replacement calls yes our our parents for now thank you so much like you said murdoch represent baby you were recognized and members are reminders we have a committee hearing starting to my my question is going to be kind of a thank you mister chair my my question can follow up back up on some of the discussions from senator murdoch because i'll see now there in my concern was if you actually had the breakdown on the individual districts of what what the calls comparison would be the actual dollar calls comparison to the eighteen and a half cent premium compared to what they were paying in the past. And then also in your study more about you have a uniform eighteen and a half percent if i'm a small cater twelve district them south arkansas as i'm the university of arkansas sitting in favor as far as the same rate so are there any considerations on that because again we're going to benefit from the lower rate but these guys are going to benefit exponentially from coverage on their properties in an insured value to a maybe a tiered system that would provide even a a lower cost in in i'm understand being echoed more cross all thanks minutes it's apples to oranges all those institutions a you know I applaud the work you've done that's I mean something up all our long was a goal on the insurance side the other problem he is we we've had we've had folks that have abused this system and used that deductible as a way to take care of maintenance and upkeep on their properties instead use it utilize an interest for what it was therefore so can you address some of those I know I said a lot out there but now I now be happy to address all that with studied and studied and study this. You know graduate with the university of our consolidate obviously I concerned to look up there and see you know billions of dollars in a five hundred million dollars limit of insurance so I think it's under insured no question about that they're gonna have to pay a little bit more rate than what they're currently paying to get the limits that they need we started looking at this and we were thinking about you know what's the best way to be able to to to share this where it makes sense and we thought that everybody understands the the football clap classifications rate. In so when we looked at it I can tell you that. The rate decreases for the small schools two three a and four a they were by for the biggest beneficiaries of making this move your bigger schools your seven a schools guess what they're going to stay now they're they're going to get a little bit of a rate decrease just to like a sand but they're going to get the limit of insurance they need and their utilization and their need the way it is greater the way that I view this in terms of higher ed and potentially even the state property which is the unbelievably nice property and would wish stand a lot in you know I know it's not included it's not included in our recommendations I want to make that perfectly clear. Nor have we had the opportunity to study it but having said that it seems like that the university has a problem a limit need problem and if we're able to get the limit need problems so for them and then solve the rate problem for the small schools kind of on the back of higher air that's a win win for everybody. So we just couldn't come up with a better way to get the limits that we need and get it for less money there there's there's nothing at let me tell you the most expensive thing about insurance it's given it to an insurance company there's nothing more expensive than that and it doesn't get lessons expensive and the only way that we're going to fix this start around. As it I mean maybe somebody else has a better idea but that's the conclusion of our study well and I applaud you for the work you've done this is you know one of the most common sense things and and business approaches that i've i've seen since i've been in the legislature so thank you appreciate it with work real hard at it. Ribson later you recognized to miss cheering out i'll try to be brief but yeah this is really interesting that it's good work yelled down there and so we're really talking about self insurance correct. Yes sir so you know I work for large corporations and and they were all self insured in the only reason there by don't go this because they don't have the upfront money you're a bike do it right it's a good thing which is going to have money started so I mean it's a smartest way to go for insurance but. The issue or the problem comes in the expertise in operating the program the risk that they they risk prevention risk assessment the rate setting and the investment portion and you'd cover those three areas but so I guess i'm a little fuzzy on you know how we're gonna cover that I mean are we gonna be hiring people in the state government or is a company you're gonna say that we should the way that we view it in corporate governance is when we talked about having two distinct divisions within to have a a risk management rise control portion of the board that would be operated by the arkansas insurance department who's already doing an excellent job with that very thing with the valuations with the things that you're talking about said which is the third party bender that has been involved in a lot of the claims so there would be a claims management company there that's most of this is already in place on the risk control side when you start your own insurance company but this is not our first insurance captive. This is something that we do as a company I like insurance captives are like people that manage their risk so that they can reap the rewards of their efforts. I want the insurance company to reap the rewards I want the company that i'm writing the coverage for building the captive for to reap the rewards and that's what the state can do here so you would have a risk finance part of your board that would be made up of someone like us a broker you would then have a captive manager that would handle all of the things that you're talking the compliance issues that's what a captive management company does and then you would have an an investment advisor that would sit on that board so every function of the insurance company is represented by the board of directors and all of them the health of the insurance company is being served by the risk finance piece of it also being served by the risk management piece of the board but it at the same time the risk management piece of the board is protecting the kids and keeping him in school by keeping the the schools from having losses unbelievably critical part of this with all of that in no decision making the authority with one person decision making the authority in the board that reports to the commissioner of the state that's what we think should happen so the controlling entity would be the insurance department the umbrella control man yeah and it it is for to the programs today so the snot something that's completely different thanks. Certain murdoch you're recognized for question and always say that because we do have a community here and start it too and in another community okay and I know this is not a last day dealing with this you know we'll have time but a couple of things that will go forward that I want us to pay at some attention to is I call the glove approach to some degree where you have this big of a program that to me we still did with some apples and some oranges when we incorporate categories with higher aid to me from property sizes if you will if I look at the university of arkansas where i'm a graduate as well and I look at philips county or a school district there you know and we were putting this oldest in the same time i'm just my early look at this and i'm just my early look at this is that that that one sized fits all if you will approach may need to be tweaked we'll see certainly not saying you haven't done your research and i'm just looking at it. Stake holders always when something of the size. Happens i'm always concerned about who's been at the table to make up this great meal that you've presented to me. Who when I talk about it on the districts uh associations other people that would be definitely affected by this aa whoever I mean who's been at the table with you throughout this process to have input. So you're looking at the people that have been locked in a room since about august going through all of this data and putting this together so i'm not sure that i'm following the question we've been studying there's very very closely for several mars and the what we've put together is conceptual you know there will be things that have to occur and have to happen and you'll have to choose the different members of this boards but when you're talking of the board but when you're talking about specifically the one size fits all approach I wanted to tell you that the beauty of having your own insurance company is that gives you the flexibility of the levers that we talked about for those that have that see that the table took to way and yet to make those changes in say hey maybe we do there is something about self insuring the two a schools or maybe you look at the university of arkansas in its need beating greater so I don't know if that answers your question as a court should only because says it's something we're just getting you spent hours and hours and hours a hundred hundred right so there are things obviously that me as trying to be responsible senator i'm going to actually certainly question the major inherent way it would eleven levers may give me some year or some level of be happy to talk to you better than semi life so what will take time to try to read through these and then we'll try to get there but appreciate the time yeah yep like you said mural and course for the alc executive subcommittee we appreciate all feedback from members this is been a a long process on over the gentleman the table specially in working through it so we continue to welcome that feedback although we're not taking action today so I appreciate the. Uh involvement of the members and I know i'm saying that to a fairly empty community room so with that thank you so with that I think see no other business we're joined thank you.