Status: In-Compliance The department conducted an internal review to pull together a budget designed for priorities and goals for the agency. The department has prepared departmental budgets with information on current services to lay the groundwork for budget expenditures. The department has also gathered information to develop estimates of future spending on current services. With that information, the department can build its budget proposals based on the needs of the agency.
The department has made a proposal to move toward a more dedicated funding system. The fund is created out of the fees and assessments, fines and penalties, taxes, and other incomes generated by the department while most taxes which includes premium and retaliatory taxes go into the state’s general fund. With dedicated fund system the department spends from the dedicated fund up to a level appropriated by the legislature. Should incoming revenue exceed the department’s expenditures; the balance is carried forward to the next fiscal year. However, if the dedicated revenue is less than anticipated appropriated amount, the department must reduce spending or use the carried forward funds from the previous year(s). In an effort to boost revenue funding, the department requested a change in the funding of the Captives program. This change was passed by the General Assembly allowing the department to retain 20% of tax revenues for operations instead of 10% as contained in the original legislation. The Captives industry has grown substantially over the last decade and Charleston has become the domicile location of choice for domestics Captives.
An agency dedicated funding process would allow the department to lessen the effect of cyclical revenue changes in funding over time. The department would also be better able to retain a cash balance during positive revenue periods and maintain consistent agency operations during economic distress. According to the NAIC 29 State insurance departments are fund using the dedicated funding method.