Hawaii’s gets good grades in the State Integrity Investigation for keeping its insurance commissioner’s office relatively well-staffed. But like others, the office struggles with budget cuts.

Hawaii received an overall F, or 57 percent, grade in the State Insurance Commissions category. That put us in 37th place, tied with North Dakota. Mississippi came in first. At the bottom was Wyoming.

Overall, the State Integrity Investigation ranked Hawaii 10th after Civil Beat reporters researched 330 “Corruption Risk Indicators” across 14 categories of government. (Click here to learn more about the methodology used for the project.)

Bottom line: The office of the insurance commissioner is relatively well-staffed, but like many other state agencies, in tough times it is vulnerable to budget cuts.

Here’s the basis for the 62-percent grade that contributed to the overall 57 percent score in the State Insurance Commissions category. It’s your turn to evaluate whether Civil Beat got it right and to share what you think should be done to improve the situation. Share your comments at the bottom of this story.

Here’s the first question the State Integrity Investigation asked regarding state insurance commissions.

Does the state insurance commission have sufficient capacity to carry out its mandate?

Overall score: 62%

Here are the criteria Civil Beat used to answer that question and what Civil Beat found.

1. In practice, the state insurance commission has a professional, full-time staff.

Notes: There is no state insurance commission, but there is a state insurance commissioner. The Insurance Division oversees the state’s insurance industry. It is led by the state insurance commissioner and the chief deputy insurance commissioner. As of September 2011, the Insurance Division had 71 full-time staff members, which includes policy analysts, financial examiners, attorneys and support staff, according to state Insurance Commissioner Gordon Ito. The Insurance Division has a staff capacity of 81 people, Ito said. “In my personal opinion, we need additional staff to do a more effective job,” Ito said. “Having additional staff would ideal.” Former state Insurance Commissioner J.P. Schmidt said there were 76 people on full-time staff when he served as a commissioner.

Sources:

• Gordon Ito, insurance commissioner, Hawaii Insurance Division, 9/28/11, telephone interview.

• J.P. Schmidt, former insurance commissioner, Hawaii Insurance Division, 9/30/11, telephone interview.

Score: 75%

Scoring criteria: These are the scoring criteria for this question.
Very Strong: The state insurance commission has staff sufficient to fulfill its basic mandate.
Fair: The state insurance commission has limited staff that hinders its ability to fulfill its basic mandate.
Very Weak: The state insurance commission has no staff, or such a limited staff that it is clearly prevented from fulfilling its mandate.

2. In practice, the state insurance commission receives regular funding.

Notes: There is no state insurance commission, but there is a state insurance commissioner. The Insurance Division is specially funded through licensing fees and assessment that the Insurance Division collects to cover operation costs. However, state Insurance Commissioner Gordon Ito said the office has had budget cuts, such as furloughs and a nine percent cut in pay. State lawmakers approve an overall budget for the insurance commission, according to Lloyd Lim, Health Branch administrator of the Hawaii Insurance Division. The budget for the state Insurance Division has been consistent, because it is financially self-sufficient, according to former state Insurance Commissioner J.P. Schmidt. In 1999, the state Legislature diverted money from the Insurance Division’s budget to the state’s general funds, Schmidt said.The Hawaii Supreme Court ruled against the state Legislature’s transfer of $3.5 million and ordered the funds be returned, according to the Honolulu Advertiser.

Sources:

• Gordon Ito, insurance commissioner, Hawaii Insurance Division, 9/28/11, telephone interview.

• Lloyd Lim, Health Branch administrator, Hawaii Insurance Division, 9/30/11, telephone interview.

• J.P. Schmidt, former insurance commissioner, Hawaii Insurance Division, 9/30/11, telephone interview.

• Honolulu Advertiser, Greg Wiles, 12/20/08, “Legislature’s fee transfer reversed”.

Score: 50%

Scoring criteria: These are the scoring criteria for this question.
Very Strong: The state insurance commission has a predictable source of funding that is fairly consistent from year to year. Political considerations are not a major factor in determining agency funding.
Fair: The state insurance commission has a regular source of funding, but may be pressured by cuts, or threats of cuts, to the agency budget. Political considerations have an effect on agency funding.
Very Weak: Funding for the state insurance commission is unreliable. Funding may be removed arbitrarily or as retaliation for agency functions.

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