(Cross-posted from Orange County Progressive)
Among the deeply dishonest aspects of the Governor Schwarzenegger’s Shock Doctrine approach to the California Budget crisis is a little noticed provision to piratize part of the the State Fund for worker’s comp.
This will inevitably lead to higher insurance rates for 180,000 small businesses that now receive their worker’s compensation insurance through the “public option”.
From Worker’s comp executive;
As part of the ongoing California state budget negotiations the ‘Big 5’ agreed over the weekend that the bill directing the Department of Finance to sell parts of State Compensation Insurance Fund is – repeat – is going into the budget. Highly placed sources near the budget negotiations told Workers Comp Executive that the sale provision allows the legislature and governor to use the prospective $1B in revenue as income to balance the budget. It is as if the funds were real. But the funds are not real.
The bill, already rife with controversy, directs the Department of Finance to sell some as yet unknown parts of State Fund within two years for $1 Billion. The legislation specifically excludes both the Department of Insurance and the Attorney General from any role in the sale.
For large California companies and organizations, there’s a competitive market for workers compensation insurance. Smaller companies rely on the State Fund, which Arnold is proposing to rape.
From the State Fund’s website, here’s what they are;
Established by the California Legislature in 1914, State Compensation Insurance Fund is a self-supporting, non-profit enterprise that provides workers’ compensation insurance to California employers at cost with no financial obligation to the public.
State Fund adjusters, professional loss control representatives, and industrial hygiene and ergonomics specialists are located in offices throughout the state. Our employees provide full services for employers and their injured workers and work to keep costs down. More than 200
employer associations offer coverage through State Fund.
What happens if you piratize a non-profit fund, and sell part of it for a billion dollars?
Whoever buys this part of the business will want to make a profit and enough of a profit to justify a billion dollar investment. They won’t do this by being more efficient or smarter. They’ll do it by raising rates, and taking the cream of the pool, denying coverage to any business with higher risks, leaving the State Fund with less money, and a need to raise rates even higher on the businesses remaining in that pool.
Meanwhile, Schwarzenegger and Republicans pushed through a multi-billion dollar tax cut for multi-national businesses and continue to defend big oil and big tobacco against fair taxation.