California Senate Passes Budget, Workers’ Comp Fund Assets for Sale

The California State Senate passed a package of bills early Friday morning, revising the 2009-10 budget, that was passed in February, with $24.2 billion in deficit reduction solutions and a $921 million reserve; in total solving a $25.3 billion problem.

The bipartisan solution was the product of several months of negotiations and public hearings on how to address the historic downturn in the economy by responsibly cutting all areas of government while keeping the state’s social service safety net intact, according to Senate President pro Tem Darrell Steinberg, D-Sacramento. He noted that with this solution in place the state has resolved over $60 billion worth of deficit since January 1st.

“There are a whole host of decisions on the cuts side that pain me greatly – deep cuts to education, to health and human services and to local government. Given the circumstances, I am grateful for all the things we were able to save,” Steinberg said in his speech before the Senate vote took place.

Included in the budget is a proposal to sell a portion of the State Compensation Insurance Fund’s assets for $1 billion. However, the bill is a study bill that sets forth a series of conditions that would have to be met in order to transact any sale, including the agreement of the State Fund’s board of directors who earlier this month issued a resolution opposing any sale of the insurer’s assets and liabilities.

“Even though the actual sale of State Fund assets is unlikely to occur, the suggestion of a sale triggers more questions than answers,” said Clark Payan, CEO of Insurance Brokers and Agents of the West (IBA West). “We are very concerned that the proposed sale appears to be driven by the need for cash to solve the budget problem and don’t see that anyone has considered the long term effect of a sale. Is it prudent action to take if the short term goal puts California businesses and employers at risk? The question of the valuation also needs to be considered.”

Payan said he contacted State Fund to set up a meeting to discuss IBA West’s concerns about the sale of brokers’ expirations among other issues. “Are they including broker-placed business in the valuation of the sale? Our position is that brokers own the business they’ve placed with State Fund, so broker-placed business should not be included or contemplated in a sale,” he said.

Nevertheless, legislators were proud that they were able to agree on a budget so that the state can stop issuing IOUs.

“Over the next number of months we can now focus on fixing what we know is broken with the system,” Steinberg said. “Everything from seriously considering the recommendations of the tax commission and re-doing our tax structure in California, to bringing government closer to the people and changing the relationship between state and local government, initiative reform, to changing the two-thirds requirement, it obviously isn’t working.”

To view details of the budget revision package, the Senate Budget Committee has posted a report at http://www.senate.ca.gov/ftp/SEN/COMMITTEE/STANDING/BFR/_home/2009FINALBUDGETREVISIONS.pdf. Click the “Information” tab.

Sources: IBA West, California Legislature

Topics California Agencies Workers' Compensation Politics