Lawmakers Debate Securities, Insurance Merger


By John Celock

A plan from Kansas’ governor to merge the state’s securities and insurance regulators under one roof drew debate among lawmakers.

Members of the House Appropriations Committee questioned the potential cost savings that could come from moving the state securities commissioner from being an independent agency under the governor to being part of the state Insurance Department, which is headed by the elected insurance commissioner. Gov. Sam Brownback (R) made the proposal during his State of the State address earlier this year, saying it would allow for similar regulatory and investigative functions to be housed in one agency.

“The majority of the duplication is in the form of investigators who investigate insurance fraud and securities fraud.” General Government Budget Committee Chairman Bill Sutton (R-Gardner) said. “They go through the same efforts.”

Sutton said that the merger of the two agencies would save roughly $300,000 a year, with $100,000 being earmarked for the state attorney general to handle financial fraud prosecutions coming from the insurance and securities regulators and $200,000 being returned to the state general fund. He said that fee funds fund large parts of the budgets of the two agencies and efficiency in terms of personnel management was the biggest goal.

Lawmakers agreed to postpone final decisions on the final budgets of the insurance and securities commissioners until lawmakers act upon legislation formalizing the merger. A final decision would likely not come until May.

General Government Budget Committee Ranking Minority Member Tom Burroughs (D-Kansas City) said the biggest discussion in the budget panel was on the fact that the insurance commissioner would now be appointing the securities commissioner and what would happen if the insurance commissioner had a conflict with work that the securities commissioner wanted to work on. The governor currently appoints the securities commissioner. Burroughs said the concern did not involve Insurance Commissioner Ken Selzer (R) but rather the issue long term.

Appropriations Committee Vice Chairwoman Erin Davis (R-Olathe) said that the process for managing the investigations and prosecutions would remain the same. She noted that attorneys in the securities commissioner’s office would remain deputy attorneys general, allowing for oversight from the attorney general’s office in prosecutions. She also noted that lawmakers would still have a say in the securities commissioner.

“I will feel comfortable moving forward with a different person doing the appointing if we have a check and balance in the Senate confirmation,” Davis said.

The idea came from a state government efficiency study that lawmakers commissioned that recommended merging agencies with similar missions. The report did not specifically mention merging securities and insurance.

Several Democrats questioned the need for the merger, noting that they believe that the move was not designed to address overlapping jurisdictions, but rather to save money for the cash strapped. They questioned if a move to merge agencies should be done just to save money.

“Money was the motivating factor, “ Rep. Barbara Ballard (D-Lawrence) said.

Ballard said that she had concerns about the securities commissioner being a historically appointive office while the insurance commissioner is an elected position. She said that she does not know if that would be able to merge.

Rep. Sydney Carlin (D-Manhattan) said that she thought that the securities post should remain under the governor’s appointive powers.

Ballard said that she did not see where a merger would help the state.

“I don’t see where this is making it more effective,” she said. “I don’t see what this is fixing.”

Sutton stressed that he would favor the merger if there were no cost savings.

“Absolutely I am in favor even if there is no savings whatsoever,” he said. “Many companies offer the same products and when we have two agencies investigating we are sending the message that we are not concerned with the use of their tax dollars.”

Several states have merged securities and insurance regulators, with New York Gov. Andrew Cuomo (D) pioneering a merger of the state’s banking and insurance regulators into the Department of Financial Services in 2011. In the 1990s, former New Jersey Gov. Christine Todd Whitman (R) merged the state’s banking and insurance departments. In the late 1990s, Florida voters passed a constitutional amendment merging the elected state comptroller’s office – which regulated banks and securities – with the elected state treasurer, insurance commissioner and fire marshal’s office. The chief financial officer position – first elected in 2002 – took over the functions of both agencies. Montana has securities and insurance being regulated by the elected state auditor. Vermont, Oregon and the District of Columbia each have the functions regulated by a single agency appointed by the chief executive.

The Kansas proposal would only merge the securities and insurance regulatory functions. The banking commissioner’s office and the Department of Credit Unions would remain agencies headed by gubernatorial appointees.

Davis noted that the goal should be to achieve efficiency in government.

“You need to have an outside force come in and see what is there,” she said. “There has to be an outside impetus to find this. It is hard to change government.”