A couple of weeks ago, the Mercatus Center noticed that Brad Pitt’s non-profit was seeking stimulus money for its mission to help rebuild New Orleans:

The Make It Right Foundation (profiled here on ABC’s 20/20) — as well as dozens if not hundreds of other local initiatives and non-profits — have done incredible work in rebuilding the Gulf Coast after Hurricane Katrina. But much of this success is due to their independence from large government bureaucracies. Stimulus funding has the potential to act as what Jane Jacobs called “cataclysmic money.” There is a real danger that if social entrepreneurs and non-profits like Pitt’s become dependent upon federal funds, they will in effect become arms of the federal government. This would have a dangerous effect on civil society, and reduce our resilience to disasters and shocks, whether natural or economic.  (emphasis added -ed.)

Well, the news is that this has pretty much already happened with lots of non-profits.  Many derive the overwhelming portion of their income from Medicare/Medicaid, or from state government grants and purchases of their services.  Here in Colorado, for instance, Jewish Family Services reported in 2007 that roughly $2.5 million of $7 million in contributions, or 36%, came from government grants.  Compare this with something like the Gathering Place, a drop-in shelter for homeless women, which received no direct government aid, and whose government purchases amounted to less than 10% of total income.  No wonder organizations like JFS were lined up around the block to support Referendum C.

The degree to which these non-profits have become courtiers, to which they’ve essentially outsourced their fundraising operations to governments and a couple of lobbyists, is probably largely unknown to the public.  It’s a whole new dependency class.  If these guys get their way, there will soon be another effort to raise taxes, this time in the middle of a recession.  And once again, the government-dependent non-profits will be complaining about how their critical services are about to be cut.

As Arnold Kling has pointed out, the ability to exit is ultimately more important than the ability to vote.  The reason these non-profits are more responsive in the first place is that failure has consequences in their ability to fundraise.

This comes along with a de-friending with extreme prejudice.  The main effect of which is to keep me from following the thread on her profile, and to check to see if indeed there were any Facebook invitations to the business members of the mutual assurance company to come testify.  However, far from being left out, all three parties are already, by the enabling legislation, represented on the committee:

(III) THE CHIEF EXECUTIVE OFFICER OF PINNACOL ASSURANCE, OR HIS OR HER DESIGNEE;

(IV) A MEMBER OF THE BOARD OF DIRECTORS OF PINNACOL ASSURANCE DESIGNATED BY SUCH BOARD;

…

(VI) EACH OF THE FOLLOWING APPOINTED JOINTLY BY THE PRESIDENT OF THE SENATE, MINORITY LEADER OF THE SENATE, SPEAKER OF THE HOUSE OF REPRESENTATIVES, AND MINORITY LEADER OF THE HOUSE OF REPRESENTATIVES:

(A) A POLICYHOLDER INSURED BY PINNACOL ASSURANCE;

(B) AN INJURED WORKER; AND

(C) A MEMBER OF THE PUBLIC WHO HAS KNOWLEDGE OF THE COLORADO WORKERS’ COMPENSATION SYSTEM.

Sen. Carroll’s posting said nothing about businesses or Pinnacol, the latter of which hardly needed an invitation to participate in a committee it already sits on.  What’s at issue here is the propriety of the chairman of the committee, on a Facebook page rather than on her private home page, and not on the committee page, issuing an invitation to one – and only one – of the three parties to come air their complaints.  The injured worker and the policyholder would, it would seem, be capable of handling that on their own.

In fact, yesterday’s Denver Post carried an article about the matter, suggesting that Pinnacol already sees the committee moving in one direction:

Ross was concerned about the direction the committee was taking, saying: “The focus or slant of this seems to not be an open study but more of Pinnacol under a microscope.”

Carroll has asked that injured workers whose claims were handled by Pinnacol contact her with their stories. She said she expected injured workers to testify during the hearings.

Asked about the proposal from Ross, Carroll said it was premature to be talking about any such deals.

“There’s a ton of data and a ton of questions all over the place,” Carroll said. “To argue for a conclusion on a committee that hasn’t even started its work yet” isn’t helpful, she said.

(Carroll’s claim that Pinnacol’s trying to put a solution on the table, “isn’t helpful,” is disingenuous to say the least, given her eagerness to solve the problem in her own way this Spring, without such a committee or any investigation.)

Her claims of impartiality are further undermined by the following press release, issued Tuesday:

Senate Chamber
State of Colorado
Denver

MEDIA ADVISORY

FOR IMMEDIATE RELEASE
Tuesday, July 28, 2009

CONTACT
Abigail Vacanti (303) 866-4882
Jack Wylie (303) 866-

SEEKING INPUT FROM INJURED WORKERS!
Sen. Carroll asks for public testimony for Pinnacol Committee

DENVER-  Are you an injured worker or a family member of an injured worker who’s claim was handled by Pinnacol Assurance?  What was your experience like?  We’d like to hear from you!   If you are interested in telling us your story, please email the Committee Chair, Senator Morgan Carroll (D-Aurora), at morgan@senmorgancarroll.com.

The tone, the exclamation points, (the inability to distinguish “who’s” and “whose” are another matter), all point to an interest in attracting those with a negative story to tell.   It’s unlikely that very many people whose story amounts to, “I filed and claim and it was handled expeditiously and fairly,” are going to show up to defend an insurance company, those carpet-bombing villains, they.  I’m sure some will take the time to communicate with the committee.  I think it’s equally clear what Sen. Carroll’s level of interest in those letters will be.

Anyone with even brief experience knows how easily such hearings can be turned into parades of discontent.  No doubt there are some workers who have been treated unfairly by the company.  Likewise, there are either malingerers or those whose injuries were not work related who may use such a forum to play on the public’s natural sympathy.  One questions whether the committee will have the time or interest in re-playing those cases fully enough to screen them out.

In short, nothing that Sen. Carroll has done, from her snide email reply to a resident, to her tempermental behavior on Facebook, does anything to set one’s mind at ease about the intent of these hearings.

Yesterday, we noted that State Sen. Morgan Carroll had been used her Facebook page to troll for complaints about Pinnacol’s claims processing.  That prompted the following Facebook exchange between Sen. Carroll and a Colorado resident (forwarded to me by the resident, who wishes to remain anonymous):

Resident: Today at 5:17am
I am dismayed at your continued attempt to destroy a valuable resource for Colorado. Your current witchhunt to find negative stories to paint Pinnacol in a negative light is nothing but a blatant political stunt and is clearly seen as such. The money accumulated as reserves of Pinnacol were paid into it for an EXPLICIT reason and not a simply pile of cash for you to spend on whatever causes you deem worthy.

Morgan Carroll: Today at 6:51am
This committee is a fact-finding committee. Your loyalty to this political subdivision of the State of Colorado is laudable and I am sure they appreciate it.

Resident: Today at 7:06am
What is the reason or a need for such “fact finding” exercise at this juncture?

Morgan Carroll: Today at 7:10am
It’s about about 15 years since the legislature that created this structure has reviewed it. Their surpluses (very high compared to national) have raised the question for some as to whether (a) policyolders (businesses) are being over-charged; or (b) whether claims to injured workers are underpaid. Neither or both may be the case. We don’t know yet. Likewise, they want us to consider privatizing them. That would require evidence and an act of the legislature to do.

Color me unpersuaded.  Aside from the snide response to somewhat aggressive questioning, it’s simply not credible that someone would use a social networking site – designed for self-selection of people with mostly consonant views – to find a diverse set of opinions about anything.  Especially when her official website, which would probably draw a broader range of readership, lacks any such appeal.

The senator makes a point of referring to Pinnacol as a “political subdivision,” which it surely is.  That permits the state to determinte by statute the disposition of its assets.  But the bill itself changes the law to permit that seizure.  And it basically lies in its preamble, saying, “…clarigying the laws governing Pinnacol Assurance’s funds.”  It doesn’t so much “claify” as ‘turn inside out.”  It eliminates its operation as a mutual insurance company, and specifically transfers control over the company’s assets to the state.  Here’s the relevant section as it reads now:

The moneys in the Pinnacol Assurance fund shall be continuously available for the purposes of this article and shall not be transferred to or revert to the general fund of the state at the end of any fiscal year. All revenues, moneys, and assets of Pinnacol Assurance belong solely to Pinnacol Assurance. The state of Colorado has no claim to nor any interest in such revenues, moneys, and assets and shall not borrow, appropriate, or direct payments from such revenues, moneys, and assets for any purpose.

Seems clear enough.  The reserve fund and any profits belong to the company, not to the state.  The legislation would have repealed that section in its entirely.

So let’s be clear here: the bill that Sen Morgan Carroll, supposedly neutral leader of a “fact-finding” committee, voted for, removes the fiscal independence of Pinnacol, seizes $500,000,000 of surplus premiums paid into that fund specifically to provide coverage, says nothing about reviewing anything that the interim committee is tasked to explore.

“Fact-finding” committees frequently find whatever facts they set out looking for.  There email exchange, in tenor and content, make it pretty clear what facts Sen. Carroll has in mind to uncover.

Thus goes Rule #12 of Saul Alinsky’s Rules for Radicals.  And thus goes Sen. Morgan Carroll, chairman of the Interim Study Committee for issues related to Pinnacol Assurance, the state’s largest Worker’s Compensation insurer.  Just moments ago, Sen. Carroll posted the following on her Facebook page:

There is no question in my mind that this is the beginning of an attempt to demonize the company, in order to gain public political support for confiscating its cash and subsidize the Democrats’ spending habits for another year.

This legislative session, the Democrats floated the idea of seizing $500 million of Pinnacol’s reserve in order to help meet the budget gap for this year and next.  The idea was mercifully laid over in the House.  But it passed the Senate 19-14, will Sen. Carroll voting in favor.

Pinnacol is more than capable of making its own case on the merits.  But it needs to avoid the mistake that many companies make, and realize that this is a political fight, not a policy argument.  There are far too many Democrats who see all that cash and immediately, their eyes fill with dollar signs like a character in a Warner Bros. cartoon.

Grabbing for the nearest pile of Scrooge McDuck’s gold may be viscerally satisfying to those who, well, don’t have it.  But it’s a horrifying idea for at least three reasons:

1. It feeds, rather than cures, the state’s spending addictions. No need here to recount the sorry story of Referendum C.  If Ref C was a drunk running a tab, pillaging Pinnacol would be a smash-and-grab from the plate glass of the liquor store.  It provides barely a year to hobble by.  And at the end of that year, if it’s 1982 and not 1931, and if revenues, always a trailing economic measure, begin to recover and if we haven’t found those stimulus strings to be too onerous, then maybe we can survive through the next business cycle
2. Argentina. This really is a smash-and-grab.  It’s almost certainly illegal, and it will certainly discourage business from locating here.  The money isn’t the state’s to take, and there’s no particularly good reason to stop at an insurance company.  Pretty much any business with a large pile of cash lying around could find itself threatened.
3. It could ruin the company.  Oh, maybe not today.  But the whole point of a Black Swan is that you never see it coming, because it’s never happened before.  Unlike assembly lines, insurance companies like to have large pools of liquidity lying around the shop floor.  It’s not as though they’ve converted it into gold and visit the vault every once in a while to stare at it a la Jack Benny.  They’ve invested the money, so it’s out there working.  But it’s also available in case there’s a large claim.  Just suppose something more virulent than H1N1 infects a workplace.  Suppose that Swift plant up in Weld County gets sick, and the workers get sick because they were at work; if they’re insured through Pinnacol, guess who’s on the hook.

So Sen. Carroll has decided to try to turn the heat up on Pinnacol.  It’s dirty pool against a responsible company.