BILL ANALYSIS Ó
AB 1263
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Date of Hearing: April 13, 2011
ASSEMBLY COMMITTEE ON INSURANCE
Jose Solorio, Chair
AB 1263 (Williams) - As Amended: April 7, 2011
SUBJECT : State Compensation Insurance Fund: Conflicts of
interest
SUMMARY : Restricts State Compensation Insurance Fund (SCIF)
officers and directors post-separation lobbying and contracting
activities. Specifically, this bill :
1)Provides that members of the board of directors of SCIF, and
officers appointed by the board, including the president,
chief financial officer, chief investment officer, chief
operating officer, chief risk officer, chief information
technology officer, and general counsel, are prohibited from
lobbying SCIF for a period of two years after terminating
employment with SCIF.
2)Provides that any consulting contracts with former board
members or former officers appointed by the board, including
the president, chief financial officer, chief investment
officer, chief operating officer, chief risk officer, chief
information technology officer, and general counsel, must be
approved by the board.
EXISTING LAW :
1)Establishes SCIF as a quasi-governmental agency to operate in
the workers' compensation insurance market in competition with
private insurers, and as the carrier of last resort for
employers that cannot obtain coverage from the private
insurance market.
2)Provides that SCIF is governed by an 11-member board of
directors, nine of whom are appointed by the Governor, one by
the Speaker of the Assembly, and one by the Senate Rules
Committee.
3)Authorizes the SCIF board to appoint seven exempt officers,
including the president, chief financial officer, chief
operating officer, , a chief information technology officer,
chief investment officer, chief risk officer, and general
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counsel.
4)Provides that, aside from the seven employees appointed by the
board, SCIF employees are subject to the civil service laws
otherwise applicable to state employees.
5)Provides that SCIF is funded entirely from premiums received,
and earnings on these premiums and its reserves, and shall not
be funded with any public funds.
6)Provides that members of the board of directors of SCIF, and
the seven officers appointed by the board, are prohibited from
lobbying SCIF for a period of one year after terminating
employment with SCIF.
FISCAL EFFECT : No fiscal impact expected.
COMMENTS :
1)Purpose . According to the author, over the past few years,
SCIF management has come under increased scrutiny, and
increasing the restrictions on insider activities will help
stem the loss of public confidence.
2)Background . In the mid-to-late 2000's, SCIF experienced what
can only be described as a scandal involving board members and
its senior officers. Among many other management issues that
resulted in over 100 recommendations by a special auditor
retained by the Department of Insurance to evaluate SCIF,
concerns were expressed that certain officers and board
members were obtaining personal benefit through so-called
"safety groups" that had contractual relationships with SCIF.
Board members and officers were relieved of their duties, and
criminal investigations were initiated. However, after
several years of reviewing the evidence, it was announced
earlier this year that those investigations were being
terminated without any charges being filed.
In the meantime, the Legislature, after reviewing the auditor's
recommendations, passed two pieces of legislation designed to
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put SCIF on a sound footing to move forward. SB 1145
(Machado), Statutes 2008, Chapter 344, and AB 1874 (Coto),
Statutes 2008, Chapter 322, adopted numerous changes to the
laws that establish how SCIF is governed. The key features
involved expanding and professionalizing the board,
authorizing additional exempt employees to obtain necessary
expertise to run a company the size of SCIF, applying the
Bagley-Keene Open Meetings law to SCIF board meetings, and
applying the Milton Marks Post-Government Employment
Restrictions law to officers and board members.
3)Support . SEIU 100, the labor organization that represents
most SCIF employees, argues that anyone who solicits or does
business with the State Fund staff or with the board should
not expect favors. In light of the scandals of the recent
past, SEIU believes that the public perception that quid pro
quo may exist at SCIF must be changed. It argues that SCIF
must be willing to set the highest standards of ethics and
integrity, particularly in light of the recent national
financial industry scandals.
REGISTERED SUPPORT / OPPOSITION :
Support
SEIU, Local 1000
State Compensation Insurance Fund
Opposition
None received.
Analysis Prepared by : Mark Rakich / INS. / (916) 319-2086