Friday, August 31, 2012, 10:27 PM - Political developmentsSB 863 is on its way to Governor Brown.
The tide turned today.
Several unions that had opposed the bill reversed themselves and either went neutral or announced their support. Other unions that had flirted with opposing the bill backed off.
The tipping point appears to have been the addition of a provision in the bill for a $120 million fund to compensate more severely disabled workers.
In a short afternoon hearing held by the Assembly Insurance Committee, brief testimony was taken. Details on the $120 million fund were in short supply.
Shortly thereafter the Assembly approved SB 863, with only 4 dissenting.
Tonight SB 863 was approved by the California Senate on a final 34-4 vote.
Several speakers credited State Senator Juan Vargas for helping put the deal together. For those interested in political history, Vargas, who has carried water for insurance interests in the Capitol, was the victor over CAAA-backed state senatorial candidate Mary Salas in a race decided several years ago by less than two dozen votes. After leaving the California Assembly Vargas worked for Liberty Mutual before winning the California Senate seat.
Now SB 863 goes on to the Governor.
Here is a link to SB 863:
http://www.leginfo.ca.gov/pub/11-12/bil ... sm_v93.pdf
Friday, August 31, 2012, 10:20 AM - Political developmentsToday's San Francisco Chronicle urges the legislature to reject efforts to rush workers' comp reform. Here is the editorial from the Chronicle:
"California's workers' compensation program is expensive, unwieldy and incredibly important. So why in the world would the Legislature pass a 170-page bill to overhaul the $17 billion system that was only introduced last week?
Employers are rightfully nervous about the possibility of a large hike in premium costs starting next year. Workers' compensation insurers' loss-and-expense payments shot up by more than $1 billion in 2011, to nearly $12.5 billion. To pay for this remarkable increase, the Workers' Compensation Insurance Rating Bureau is recommending a 12.6 percent rise in premium costs for next year.
And admittedly, SB 863 will save some money. It's a sign of how slapdash this process has been, though, that even the proponents don't know how much money it will save: The office of bill author state Sen. Kevin de León, D-Los Angeles, told us that it would save $543 million. However, the Workers' Compensation Insurance Rating Bureau told us that the current version of the bill would save only around $300 million.
All of this confusion suggests not only a system that's not working, but a reform process that's not working either. That's deeply troubling - California's workers' compensation program affects nearly every one of the state's employees and employers. The last big state overhaul, in 2004, drastically cut permanent disability benefits for injured workers, and yet costs have continued to skyrocket. To get at the cost drivers, the Legislature is going to have to come back to this issue again and again - a fact that it seems to know.
"It's almost assured that there will be clean-up legislation to workers' comp," said de León staffer Greg Hayes. "The goal is to get the framework done this year and then go back and take care of the technical details."
Not encouraging. SB863 will probably pass - employers are eager to avoid a big bump in premium costs, the bill has enough support from both labor and business, and Gov. Jerry Brown has signaled that he'd like to sign it. And there are some good elements in the bill, such as added medical and operational efficiencies and a raise on the payment cap for permanently disabled workers. But a bill this important should have had a more public process - and we urge the Legislature to make sure that next year's bill has one."
Meanwhile, I'm told that no Assembly Insurance committee hearing has been set for this morning after all.
Another version of SB 863 surfaced last night (I've included a link to the bill below):
Surprise, surprise. Bill proponents have now found another $120 in savings that is to be passed on to injured workers.
We've seen variants of this story before. Although the situation was somewhat different, most readers will recall the recent flap over monies "discovered" in the California's state parks budget accounts.
This time it's savings that the DIR and employers are apparently willing to divert to injured workers.
We of course have insufficient data to make reliable projections of how much will be generated in employer savings by SB 899. Some projections had savings as high as $1.4 billion. Others had savings as low as $300 million.
If the lower estimate is right then employers would be giving up half their savings and wind up with net savings of around $150 million.
While I suspect the $1.4 billion is closer to the mark, who the hell knows?
I've heard rumors that the DWC terminated the contract of an analyst who was asked to rush through some numbers for the DIR at the last moment.
It's curious that even Republicans would want to give Jerry Brown the gift of a legislative gift when the numbers are so uncertain.
From a worker advocate standpoint, it's hard to criticize adding some more money in the bill for workers. But the newest version of the bill adds with one hand and taketh away with another. The 15% upwards bump in PD would be eliminated, so lower wage workers who could not return to their jobs would not see an automatic PD bump.
Instead, the new language creates a new $120 million dollar fund to be administered by the DIR to be derived by non-General Funds of the Workers'
Compensation Administration Revolving Fund.
In other words, employers will be assessed to pay for this fund. It's hard to see Republicans thrilled with that aspect.
The fund would be administered by DIR to make supplemental payments to workers "whose permanent disability payments are disproportionately low in comparison to their earnings loss".
According to this new Section 139.48 of the Labor Code:
"Eligibility for payments and the amount of payments shall be
determined by regulations adopted by the director, based on
findings from studies conducted by the director in consultation with the Commission on Health and Safety and Workers' Compensation. Determinations of the director shall be subject to
review at the trial level of the appeals board upon the same
grounds as prescribed for petitions for reconsideration."
Although this may be the seed of a good idea, reforms this widespread need more discussion and hearings.
The legislature and Governor Brown could agree to take up workers' comp during the special session Brown already called for December.
That would be the wise choice.
Here is the link to the August 30th version of SB 863:
http://www.leginfo.ca.gov/pub/11-12/bil ... sm_v93.pdf
Thursday, August 30, 2012, 09:18 PM - Political developmentsTomorrow is the last day for action on SB 863, the proposed comprehensive comp reform bill.
Tomorrow the bill could pass as is, or with further amendments. Or the issue could be put over to a special session of the legislature, perhaps in December.
Clearly Governor Brown wants the bill badly, enough that he has been making personal calls to rank and file legislators who have doubts about the bill or the process that has led to the bill.
The conventional wisdom is that Brown had hoped to minimize opposition to Prop 30, his tax plan, by supporting workers' comp reforms and pension reforms. Pension reforms are likely to be enacted tomorrow.
But the U.S. Chamber of Commerce has already done an ad buy attacking Prop 30. If Brown thought he could inoculate his tax plan against heavy business spending against his plan, then he is quite naive.
The money will flow against Prop 30.
I'm told by some political insiders that Prop 30 is already in trouble, drifting just above the 50% approval level that is the death zone for California initiatives.
Meanwhile, labor unions are split over SB 863. Teamsters, Machinists, ILWU, SEIU nurses and Los Angeles firefighters are among those who have signaled opposition. Some leaders in the construction trades have spoken out as well.
Art Pulaski, head of the labor federation , has tried to shore up support for SB 863 and pull the package across the line.
Pulaski headed the labor foundation in 2004 and along with former labor official Tom Rankin was involved in the disastrous negotiations that led to SB 899. On the other side of the table then, as now, were the carrot people, Grimmway Farms, and some of California's other major employers.
So it's not surprising if some injured workers and worker advocates aren't thrilled . Many feel this is a movie we have seen before.
What had been the policy province of a handful of folks at the California Labor Federation has been recently been subjected to higher scrutiny by a range of unions and those advising individual unions.
It's not clear what the endgame will be.
One rumor circulating today has been that bill proponents "found more money" in savings to use for benefits for workers. If that's true it only shows how the numbers in both savings and projected worker benefits are fuzzy.
Once source told me that the "found money" could be as much as $100 million.
If that rumor is true, it just highlights that we really don't have much of a handle on the contours of this deal.
This blog and Workcompcentral.com have asked for studies done by the Department of Industrial Relations or CHSWC on the various components of the bill. Those have not been forthcoming.
Tonight I'm hearing that there may in fact not be studies and that DIR may have been scrambling in the last few days to get studies done.
Whatever happens with SB 863, there is an interesting puzzle about how all this was put together that will be worth careful analysis. A number of interesting emails and documents have made the rounds.
Administrative Director Rosa Moran has been missing from the debate over the bill, and it will be interesting to hear from Moran at future hearings or forums.
I'm told from several sources that there may be a committee hearing on Friday. As this blog is written Thursday night it is not clear if the hearing will be to gather further information or simply to put the matter to a vote.
And of course, the Assembly Speaker John Perez "comes out of labor", having worked for UFCW. But Perez has spoken before of family members who had work injuries, so presumably he wants to get it right.
On the California Senate side I've been told there is great concern about transparency problems with the bill and how the bill's numbers have been constantly shifting.
Over the last several weeks I've fielded a large number of calls about the bill, mostly because I do the blog. Those included a few from SB 863 supporters or organizations who are in support.
So it was of interest when I received a call yesterday from an official of a union that is a CalFed member officially in support of SB 863. The official noted that because of complicated CalFed politics his union chose to not come out in opposition.
But the labor official noted that even if the bill does survive and is signed, it's a better bill than it was several weeks ago. The official noted that he was thankful that bill opponents had raised so many questions and had pushed so hard for a better deal for workers, as uncomfortable as the last several weeks may have been for the CalFed negotiators.
That's beyond question.
Tuesday, August 28, 2012, 10:57 PM - Political developmentsThe legislative session comes to a close on Friday, so we're in the home stretch on California workers' comp reform.
Here's a link to an op-ed piece I did on the issue that is in the California Progress Report:
http://www.californiaprogressreport.com ... opposition
And here's a link to a blog post by David DePaolo on the issue of constitutionality of reform provisions:
http://daviddepaolo.blogspot.com/2012/0 ... ature.html
If you'd like to watch the August 28, 2012 informational hearing on workers' comp that was held at the Capitol, here is a link:
As I post this, it's not clear what fate awaits SB 863. Stay tuned.
Monday, August 27, 2012, 09:29 PM - Political developmentsEfforts to enact a comprehensive California workers' comp bill are down to their final days.
Depending on whom you talk to, the reforms are either inevitable or on life support.
Tomorrow (Tuesday) there will be an informational hearing at the Capitol on SB 863. Within days the measure could come for an Assembly vote and then be sent to the California Senate.
Late today I heard rumors from various sources that an August 24, 2012 assessment by David M. Bellusci, Senior VP and Chief Actuary of WCIRB California, was causing some employer groups and self-insureds to reconsider their support of the comprehensive reform bill.
That could happen.
But there have been several instances over the last month when it looked as though events would derail the reform effort only to have the effort remain strong. In politics one doesn't necessarily put faith in all the rumors one hears.
What is the importance of the WCIRB letter?
First, some background. During the last year various employer stakeholders have insisted that they could not support a comp reform bill that merely had a 1 to 1 ratio between savings and increased benefits to workers.
Supporters of the reform have touted that there would be $740 million n increased benefits to workers, although the accuracy of those figures has been hotly contested and the underlying assumptions challenged.
Reform advocates claimed that the proposal negotiated between labor and employers would create as much as $1.4 billion in savings. That's a 2 to 1 ratio of savings to benefit increases.
But the WCIRB report questions that.
Specifically the WCIRB says that:
"Based on our preliminary analysis, the WCIRB estimates the impact of the provisions in the proposed legislation that we were able to evaluate on injuries occuring in 2013, including the impact on claim frequency (utilization), is an overall cost reduction of 2.2%, or $0.4 billion, based on an estimated statewide cost of indemnity and medical losses and loss adjustment expenses (LAE) of $19 billion on injuries occurring in 2013.
In addition, the increased permanent disability benefit provisions effective on injuries occurring on or after January 1, 2014, including the impact on claim frequency (utilization) are estimated to increase total costs by 3.7%, or $0.7 billion. In total, by the 2014 injury year, the proposed legislation, including the impact on claim frequency (utilization), is estimated to increase total system costs by 1.4%, or $0.3 billion, annually."
This means that the WCIRB is coming up with very different figures than those originally trumpeted by the reform advocates.
I find it doubly interesting because one of the labor advocates, trying to convince me that the reform package is a good deal, had indicated to me that the projected benefit increases will be much higher than the system savings.
Which, of course, if true, would be anathema to some of the employer advocates who were pushing for much higher savings than benefit increases.
So we have wildly different pictures being painted.
We have labor advocates that believe that applicant attorneys are making a big mistake opposing the package. We have applicant attorneys questioning the numbers and contending that the package favors workers with lower disabilities while taking away from workers with higher disabilities. And we now have employers wondering if they are being sold a bill of goods.
And now there is a memo making the rounds from Frank Neuhauser of UC Berkeley which claims that higher wage workers will do well under the reform, an issue that is contested by the applicant attorneys.
Part of the problem is that the package has been rushed and that underlying studies have not been released in a way to give time for folks to carefully crunch the numbers.
If the package dies, the irony may be that some believe it does not acheive enough savings and some belieive that it does not deliver enough in benefits.
And you wonder why workers comp has a reputation in Sacramento as being a political tar pit?