California: Commissioner concerned with proposal to sell state comp fund assets

California Gov. Arnold Schwarzenegger believes selling some assets of the State Compensation Insurance Fund may provide a solution to the state's budget crisis. Insurance Commissioner Steve Poizner, however, is concerned that the proposal could have significant ramifications for the workers' compensation market in the state.

Schwarzenegger floated the idea in a recent revised budget proposal, which suggested that SCIF retain its role as a workers' comp insurer of last resort but that a portion of its asset be sold to a private insurer. The governor said the sale could generate as much as $1 billion for the state.

Poizner raised several concerns about the plan, including the possibility that the fund might go bankrupt if it loses the ability to write voluntary business in addition to acting as the insurer of last resort. Poizner also said that pushing through a quick sale before thoroughly studying the situation could have dire consequences for the cost of workers' comp coverage for many employers in the state. Under the proposal, approval for the sale would not be required from Poizner's office or California's attorney general.

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According to officials from the SCIF, the idea of either selling or privatizing the fund has been suggested at various times. However, the proposals have always been dropped after considering legal challenges, as well as potential risks to the market and economy.

"While there's no guarantee the outcome this time will be similar, the risks have not changed and in fact may be greater given the recession," officials said.

Fees protest. In addition to the debate over the SCIF, an employer coalition launched a statewide campaign to protest a budget proposal that calls for more than $60 million in new fees on workers' compensation premiums.

According to the Workers' Compensation Action Network, the assessments are part of a state budget proposal by the Department of Industrial Relations to shift the cost burdens for the Division of Occupational Health and Safety and the Division of Labor Standards Enforcement from the state's cash-strapped general fund to employers.

"This additional burden on California employers couldn't come at a worse time," Jack Steward, member of the coalition and president of the California Manufacturers & Technology Association. "The state may be in dire need of funding but imposing more fees on employers is only going to cost California jobs and make this recession worse. No employer should be assessed additional workers' compensation fees at any time to pay for government programs not directly related to the administration of the state workers' compensation system."

WCAN officials said employers currently pay workers' comp assessments totaling more than $311 million annually, which provides all of the funding for the Division of Workers' Compensation and related programs. Employers that are self-insured, including cities, counties and school districts, pay similar assessments based on their payroll and workers' comp costs. Overall, the current proposal would increase these assessments by 22 percent to fund the activities of Cal-OSHA and the DLSE.

Read more at the WORKERSCOMP Forum^TM homepage.

July 16, 2009

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