Kevin Braun, general counsel for Montana State Fund, right, testifies before the joint meeting of the House Business and Labor and Senate Business, Labor, and economic Affairs committees

Kevin Braun, general counsel for Montana State Fund, right, testifies before the joint meeting of the House Business and Labor and Senate Business, Labor, and Economic Affairs committees during the first day of the special legislative session.  

Thom Bridge ,thom.bridge@helenair.com

Montana State Fund was denied a temporary restraining order to immediately stop the state from collecting a 3 percent management fee on some of its investments with the state Board of Investments.

The fee will take effect once the bill is signed by the governor, which has not happened yet. A Helena District Court judge on Monday set a hearing for Dec. 4 to determine if the State Fund's request for preliminary injunction should be granted to halt the fee going forward.

District Court Judge Michael McMahon also questioned if the Fund had a legitimate case going forward, writing, "the court is concerned whether (Montana State Fund) has established a legitimate cause of action or that it is likely to succeed on the merits of its claims."

Laurence Hubbard, president of the State Fund, said Monday he wasn't surprised about the decision and that the language in the order didn't worry him.

"The court has not yet considered the merits. I don't want to over-read into that kind of language."

The fee, which would be charged on any investments over $1 billion, was approved by lawmakers during a special session that ended early in the morning last Thursday. Montana State Fund is a quasi-public workers' compensation organization. Those who supported the management fee said the Fund holds too much in reserves and charging a fee on the excess does not take money from the Fund, but only reduces the amount going into reserves.

The Fund and other opposed say the Legislature does not have the authority to charge the fee, that the Fund needs to hold that much excess in reserves and that the fee could mean those who pay premiums could see an increase in rates or decrease in dividends.

The session was called to address an expected $227 million hole in the state budget and the fee would have generated $30 million over two years.

The idea was presented to lawmakers by Gov. Steve Bullock. During hearings, it was both panned and praised and at one point looked doomed after failing an initial vote in the House.

McMahon found that the State Fund would not suffer immediate and irreparable injury and said at this point the court is more concerned over whether the Fund has a legitimate cause in bringing a lawsuit.

State Fund argues the fee constitutes a $30 million governmental taking.

"We have serious concerns about the propriety of the lawsuit and it appears the court feels the same way," said a spokeswoman for Bullock in an emailed statement Monday.

Hubbard said on Nov. 10, after Bullock's first indication that charging the management fee was on the table during the special session, State Fund held a special meeting of its board of directors, and he was authorized to oppose the legislation and "take all legal means necessary to prevent the takings or transfer of assets" of the State Fund.

Hubbard said the process is still in the early stages.

"We really need to find out who owns the assets of the Montana State Fund. This is early stages and there's a lot more to be reviewed by the courts."

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State Bureau reporter for The Independent Record.

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