NAIC Subcommittee Approves 1999 Budget
National Association of Insurance Commissioners' Internal Administration Subcommittee approved the association's budget for 2000 following a public hearing conducted by conference call. The budget will be considered by the full NAIC membership during the Winter National Meeting in San Francisco next month.
"We are committed to an open budget process at the NAIC. This conference call permitted interested parties to voice their views on the proposed budget. Normally, we have a public hearing in a meeting room in Kansas City, but due to conflicting travel schedules, we thought the best way to ensure public input in a timely fashion was to conduct the meeting during a conference call," Catherine J. Weatherford, National Association of Insurance Commissioner Executive Vice President said.
"The proposed budget for the year 2000 continues the policy of providing a prudent, sound, responsible budget that is supportive of the members' needs," Weatherford said. "The 2000 proposed budget will allow the association and its members to move forward with our current operations and begin a select number of new initiatives without requiring new funding sources.
"Approval by the Executive Committee and Plenary session at the December NAIC meeting in San Francisco will provide the financial roadmap for the Association beginning January 1, 2000," Weatherford said.
Weatherford said the proposed budget calls for projected revenue of $46.3 million, a 4.32% increase. Proposed spending in the 2000 budget is $45.6 million, a 7.20% increase next year over current spending. However, much of the increases are tied to the reorganization of the association's Securities Valuation Office (SVO) in New York. "Revenue increases would be only 0.8% and the increase in expenses would be a modest 1.67% without the SVO reorganization," Weatherford said.
Significant revenue changes from 1999 to 2000 are:
• Database fees are budgeted to decrease approximately $78,450 due to an increase in companies filing under the group fee cap of $150,000.
• Publications and subscriptions are budgeted to decrease $430,094 due to the elimination of filing requirements for securities that are rated by other nationally recognized securities rating organizations. In addition, the reorganization and estimates of the date publications will be available for sale will result in a decrease in sales of hard copy publications.
• Services are budgeted to increase by $2.1 million due to the implementation of the new filing fee structure under the SVO reorganization.
• Education Program revenue is budgeted to increase by $308,475 with five new educational programs being offered in 2000. Additional sessions will be added for some existing programs, as well.
Significant expense changes from 1999 to 2000 are:
• Salaries and related employee benefits are budgeted to increase $2.2 million and $218,753 respectively. These increases include an average annual increase of 4% on base salaries and other adjustments. Those adjustments include the SVO reorganization, the final component of the 1997 wage and compensation study, Publications Department reorganization, and bi-annual adjustments to salary ranges. With the strong economy, the job market is very competitive and the NAIC adjusted previous salary levels to attract and retain qualified employees.
• Professional services budgets have decreased $1.01 million, due to the conclusion of Year 2000 testing activities.
• Computer services will increase $410,843 primarily due to the SVO reorganization.
• Examiner Team Expenses are budgeted to decrease by $76,900 because of the redesign of the examiner team software system and procedures.
• Education Programs are slated to increase $247,531 because of the addition of 5 new educational programs and the increase in existing program offerings.
• Occupancy will increase by $513,629 related to the move to a new facility in 2000.
The proposed change in the corporate structure of the NAIC was discussed during the call as well. The structure change includes language for a new Certificate of Incorporation and Bylaws of the NAIC and an amendment to the existing NAIC Constitution, which adds a new Article XII, relating to reorganization.
"Ninety-five percent of all associations today are incorporated, and the size and sophistication of the NAIC's activities make this desirable for the future," Weatherford said. The change in tax status is recommended because, overall, the 501(c)(3) charitable, educational organization is a better fit for the activities of the NAIC. Advantages include the fact that the public generally has a better understanding of the nature of a 501(c)(3) organization, and that status would permit the NAIC to expand educational activities in the future.
"The 501(c)(3) tax status is a better fit for us as an organization. We anticipate no significant changes in the officer structure or in the committee structure as a result of this reorganization. We have been careful to preserve the existing NAIC committee structure, officers, and zones, so that this change really will not affect our members, the industry they regulate, or the consumers they protect," Weatherford said.
The NAIC is located on the World Wide Web at www.naic.org. It is the nation's oldest association of state government officials, consisting of insurance regulators from the 50 states, the District of Columbia, and four U.S. territories.