Applicant Eligibility

Appeal Brief

Appeal Letter

Appeal Analysis

Background

From January 17 through January 21, 2012, Oregon experienced a severe winter storm that caused flooding, landslides and mudslides.  The incident resulted in the declaration of a major disaster (FEMA-4055-DR-OR).  The State Accident Insurance Fund Corporation (SAIF) sustained flooding damage with associated repair costs totaling $2 million as a result of the event.  SAIF is a legislatively-created public corporation providing workers’ compensation insurance and reinsurance for the State of Oregon.  On April 16, 2012, SAIF submitted a Request for Public Assistance (RPA) as a state agency to FEMA.  On April 20, 2012, FEMA denied that request, finding that SAIF is not a state agency or instrumentality of the state of Oregon, but a public corporation separate and apart from the state. 

First Appeal

In a first appeal letter submitted June 18, 2012, SAIF argued that it is an instrumentality of the state due to various ties with and obligations to the Oregon state government.  SAIF listed the following facts about its structure and relation to the state government:

1. Statutory creation of a state agency in 1913 and the transformation into SAIF’s current form as “an independent public corporation;” 
2. Legislature’s power to change its relationship with SAIF by changing the statutes that define and govern SAIF;
3. Accountability to the state through the Governor, who appoints the SAIF’s Board of Directors, which serves at the pleasure of the Governor;
4. Requirement that SAIF adhere to Oregon’s Public Records Law and to annual audits by the Oregon Secretary of State;
5. Oregon Attorney General’s representation of SAIF in litigation, unless SAIF requests permission to have another attorney represent it;
6. SAIF’s members and employees are public officials subject to Oregon ethics laws and its employees participate in the state retirement system; and
7. Oregon State Treasurer holds the Industrial Accident Fund, which is the fund that pays for the SAIF’s daily operations.

SAIF distinguished the rulings in two Oregon state cases, one finding that SAIF was an instrumentality and another case finding that it was not. SAIF listed the criteria that the Supreme Court of Oregon uses to determine if an entity is a state instrumentality. 

The FEMA Region X Acting Regional Administrator (RA) denied the first appeal on December 18, 2012.  In support of the determination, the Acting RA utilized the analysis from the state case that found that SAIF was not a state instrumentality.  In that case, the Supreme Court of Oregon found that the Applicant was not a “person” within the meaning of Section 1983 based on two key factors: (1) the character and nature of the entity under state law; and (2) the liability of the state for the financial obligations of the entity.  The Acting RA noted that the Oregon Supreme Court observed that some statutes treat SAIF as an “arm of the state” and others do not.  The RA’s response also indicated that the legislation creating SAIF “substituted” language for creating an “agency” for language creating SAIF as a “corporation.”  The Acting RA addressed the various links that SAIF has to the Oregon state government and examined SAIF’s purpose, powers, and exemptions from laws generally applicable to state agencies.  In that examination, the Acting RA indicated that SAIF is “entirely self-supporting from fees, earnings, and premiums generated,” emphasizing SAIF’s investment income and capital gains.  Ultimately, the Acting RA concluded that SAIF is not an eligible applicant because SAIF cannot utilize the state’s sovereign immunity.

Second Appeal

SAIF argued in a second appeal letter dated February 19, 2013, that it is an instrumentality of the state and again made reference to the facts detailed in the first appeal letter.  SAIF notes that the Oregon Supreme Court has recognized it as a state instrumentality.  In Eckles v. Wolley, the Court stated that the state “allows the creation of a corporation for a public purpose, ‘whose members are citizens, not stockholders; an instrument of the government with certain delegated powers, subject to the control of the legislature, and its members officers or agents of the government for the administration and discharge of public duties.’”  302 Or. 37, 46 (Or. 1986).  SAIF also points to its similarities with other public corporations that perform public functions.  

Discussion

The Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act) Section 102 (4) defines “state” as “any State of the United States, the District of Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands.” Section 102 (7) of the Stafford Act, defines “local government” as (a) county, municipality, city, town, township, local public authority, school district, special district, intrastate district, council of governments (regardless of whether the council of governments is incorporated as a nonprofit corporation under State law), regional or interstate government entity, or agency or instrumentality of a local government; (b) an Indian tribe or authorized tribal organization, or Alaska Native village or organization; and (c) a rural community, unincorporated town or village, or other public entity, for which an application for assistance is made by a State or political subdivision of a State.”  (Emphasis added)  Implementing such authority, Title 44 of the Code of Federal Regulations (CFR) §206.222 (a), Applicant eligibility, provides that state and local governments are entities that are eligible to apply for assistance under the State public assistance grant.  State and local agencies and departments are also eligible applicants.  While the Stafford Act authorizes FEMA to provide Public Assistance funding to instrumentalities of local government, it does not extend such authority to include instrumentalities of state government as eligible applicants.  

In its second appeal, which was submitted by the Oregon Department of Justice’s General Counsel Division on SAIF’s behalf, SAIF explicitly states it is an instrumentality and integral part of the state of Oregon.  It emphasizes the Oregon state government’s control over various aspects of SAIF’s operations.  For instance, the Oregon state legislature originally created SAIF as a state agency and later restructured it as public corporation to increase its level of competition with other insurers in the marketplace.  The Oregon governor also appoints SAIF’s board of directors subject to State Senate confirmation, and each director serves at the governor’s pleasure.  The SAIF members and employees are public officials subject to ethics laws and its employees participate in the state retirement system.  Additionally, the Oregon Attorney General must represent SAIF in litigation, unless SAIF requests permission to have another attorney represent it.  Finally, the Oregon State Treasurer holds the Industrial Accident Fund (IAF), which is a trust that funds SAIF’s daily operations.  SAIF also cites to Oregon state case law to support its status as an “instrumentality of the state.”  As SAIF has clearly and explicitly identified itself as an “instrumentality of the state” and not one of the local government, SAIF is not the type of entity that the Stafford Act identifies as an eligible applicant.

It is noteworthy that neither the Stafford Act nor its implementing regulations and policies define “instrumentalities.”  In making an eligibility determination about instrumentalities of the local government, FEMA would evaluate an entity on a case-by-case basis.  One possible way to determine eligibility is to look to the “public entity” definition.  Pursuant to 44 CFR §206.221 (g), a “public entity” is an organization formed for a public purpose whose direction and funding are provided by one or more political subdivisions of the State.  Further policy guidance on public entities states that a majority of an entity’s funding should come from the State or one or more of its political subdivisions.

FEMA could also be informed by guidance from other federal agencies that determine if an entity is an “instrumentality” of government. These factors largely reflect the elements of the “public entity” definition, which focuses upon who has control over the instrumentality and the source of the entity’s funding.  Federal case law, which could be looked to in determining an entity’s status, also aligns with the components of the “public entity” definition.  Federal courts acknowledge that its decisions regarding whether an entity is a state instrumentality turn on the “nature of the entity created by state law.” Regents of Univ. of California v. Doe, 519 U.S. 425, 429 (1997).  In Forster v. SAIF Corporation, the United States District Court for the District of Oregon noted that the question of an entity’s status “must be answered based on the state law that defines” that entity’s character.  Forster v. SAIF Corporation, 23 F. Supp. 2d 1196, 1197 (OR 1998).  The Court states that “when interpreting state law, a federal court is bound by decisions of the state’s highest court.”   The decisions of a state’s court generally provide information about the level of control exerted over an entity and the source of an entity’s funding.   

Even if FEMA could extend the “instrumentality” designation to state-level entities through the “public entity” definition, FEMA would still find that SAIF does not qualify as an eligible applicant for Public Assistance funding.  Although, it is clear that SAIF serves a public purpose and receives a significant level of direction from the Oregon state government, SAIF would not meet the financial criteria because its funding is not provided by one or more political subdivisions.  The IAF is a trust that pays for SAIF’s operations and is built through the collection of consumer fees, premiums and processing claims.  Oregon does not have an ownership interest in IAF, does not appropriate money to the IAF or SAIF from the state’s general fund, and as the Acting Regional Administrator noted in its appeal response, does not control the IAF.  Instead, SAIF controls disbursements from the IAF and can set aside reserves within it.  Based on the factor’s identified with relation to SAIF’s funding, FEMA does not find that any level of government funds SAIF.  As such, even if FEMA were to apply the “public entity” definition to determine SAIF’s eligibility, it would find that SAIF only meets one of the two criteria and consequently is ineligible.          

Conclusion

SAIF is neither a state agency nor the type of entity that the Stafford Act recognizes as an eligible applicant.  As such, it is not eligible for Public Assistance funding.