Senate Judiciary Hearing: Asbestos Trust Fund Should Be Abandoned

9 June 2006

The testimony of former Congressional Budget Office (CBO) Director Douglas Holtz-Eakin validates the criticism that the Coalition for Asbestos Reform (C.A.R.) has made for many months about a federal trust fund approach to the asbestos litigation situation. Dr. Holtz- Eakin's testimony states:

-- The FAIR Act will raise new federal revenues.

-- Both the scale of the mandatory spending and the size of the revenues

are highly uncertain; there is no guaranteed relation between

them . . . [M]ost of the spending will occur quite quickly and

necessitate new federal borrowing.

-- When FAIR Act benefits exceed fund resources, a future Congress and

administration are equally likely to turn to the taxpayer for the

shortfall.

-- This is the wrong time to create new federal mandatory spending.

Indeed, the most central budget challenge is the need to have less

mandatory spending in the years to come.

"Throughout the debate over legislation to create a new $140 billion asbestos trust fund, proponents have pointed to CBO as the pillar buttressing the trust fund's financial viability," said C.A.R. Chairman Tom O'Brien. "But the pillar appears to be crumbling . . . opponents of the bill pointed to CBO's extensive caveats interlaced in its analyses and study after study employed CBO's own data to show that the trust fund would fail with disastrous consequences. In light of Dr. Holtz-Eakin's strong testimony, CBO should consider revising its analyses."

Uniting in opposition to S. 3274, C.A.R. members A. W. Chesterton, Hopeman Brothers, and National Service Industries submitted written testimony to the Senate Judiciary Committee that warned "The Act will tax small well-insured companies like ours in a way that is almost unconscionable."

Noting that a federal trust fund is "still the wrong approach" because of the large new bureaucracy it creates and questions regarding the funding revenue uncertainties, constitutionality, and inequitable and arbitrary funding scheme, the joint statement urges Congress to abandon the trust fund and instead "pass federal medical criteria legislation."

Testimony by C.A.R. member and Liberty Mutual Chairman Ted Kelly concurred, documenting the tremendous positive impact that state medical criteria, venue and case-consolidation reform has made in reducing the number of asbestos claims while simultaneously ensuring that the truly sick receive compensation.

Kelly testified that since statutory and judicial reforms have been made in Mississippi, Texas, and Ohio -- three states that previously accounted for 80 percent of asbestos claims filed against Liberty Mutual policyholders -- the volume of claims has dropped by 90, 65, and 35 percent, respectively. "These numbers are the best evidence that state-driven initiatives are working and should not be negated by the passage of S. 8274," Kelly added. "To the contrary, these efforts should be replicated at the federal level" through the enactment of Utah Congressman Chris Cannon's legislation to establish federal medical criteria.

O'Brien noted that in the past week the governors of two states -- Kansas and South Carolina -- signed medical criteria legislation into law and that silicosis reforms were enacted in Tennessee.

C.A.R. is a group of smaller and medium sized businesses and their insurance companies committed to educating U.S. businesses and policymakers about the serious flaws in S.852 and its successor S. 3274. The coalition mobilized in June 2005 to launch a major national campaign to explain the effect of the bill on hundreds of local businesses that face potential asbestos liability, most of whom are unaware of the devastating impact of $140 billion in new taxes that both bills levy to finance the trust fund mandated by the bill.

Source: prnewswire

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