BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1263|
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CONSENT
Bill No: AB 1263
Author: Williams (D)
Amended: 4/7/11 in Assembly
Vote: 21
SENATE INSURANCE COMMITTEE : 9-0, 6/8/11
AYES: Calderon, Gaines, Anderson, Corbett, Correa, Lieu,
Lowenthal, Price, Wyland
ASSEMBLY FLOOR : 74-0, 5/5/11 - See last page for vote
SUBJECT : State Compensation Insurance Fund
SOURCE : SEIU Local 1000
DIGEST : This bill extends current post-employment
lobbying restrictions for State Compensation Insurance Fund
Board Members and exempts employees from one year to two
years and requires board approval of consulting contracts
with former board members of exempt employees.
ANALYSIS :
Existing law :
1. Establishes the State Compensation Insurance Fund (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
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private insurance market.
2. Provides that SCIF is governed by an appointed 11-member
Board of Directors.
3. Authorizes the SCIF Board (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 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.
This bill:
1. Revise the prohibition on SCIF officers and directors
from lobbying SCIF from one year post-termination to two
years after leaving employment with SCIF.
2. Requires that any agreements on SCIF's behalf which
provide for consulting services to be provided by a
former SCIF Board member or Officer must be approved by
the SCIF Board of Directors.
Comments
In 2008, the Legislature passed SB 1145 (Machado), Chapter
344, Statutes of 2008, to increase SCIF's transparency and
accountability in response to recent concerns. At that
time in 2008, the impetus for those changes was described
in an analysis of SB 1145 as:
"In the past two years, there has been an aura of scandal
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surrounding SCIF. In the fall of 2006, two board members
voluntarily resigned after conflict of interest concerns
were raised -- the board members were, according to a DOI
audit (see below), owners or had a financial interest in
insurance brokers or associations receiving substantial
payments under SCIF's Group Association Program. The SCIF
Board of Directors then hired an outside legal firm to
conduct an internal examination and audit, and in March of
2007, the Board fired several executives, including the
President and an Executive Vice President. That
examination uncovered serious abuses at the highest levels
and led to a joint criminal inquiry by the DOI, the
California Highway Patrol (the investigatory agency
responsible for investigating state agencies when there are
allegations of criminal misconduct) and the San Francisco
District Attorney's office that is ongoing, and is expected
to continue for several more months.
"At the same time, the DOI, as part of its regulatory
authority, launched a full operational and financial audit
of SCIF by an outside firm, RSM McGladry. That audit was
recently completed, and provides a scathing review of an
organization run amok, with poor business practices,
non-existent or ignored management control systems, and
sloppy accounting procedures, among other issues, with the
problems spreading throughout the organization."
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 6/9/11)
SEIU Local 1000 (source)
State Compensation Insurance Fund
ARGUMENTS IN SUPPORT : According to the author's office,
this bill's one year extension of the post-employment
lobbying restriction and its application to other officers
will, along with the board approval of consulting contracts
will "ensure that the SCIF Board and staff are not unduly
influenced by former members of the Board of Directors or
former employees as they make decisions on how best to
invest the fund's money".
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The author's office notes that this bill's contracting
provisions "will bring the letting of consulting contracts
to former board members and employees into the open". By
requiring approval of such contracts by the Board (as
opposed to being negotiated by just a few Board members
and/or staff), this will "prevent the appearance of
impropriety or deferential treatment to former employees or
Board of Directors Members by the current Board."
Finally, the author's office states, "The SCIF acts as the
workers' compensation insurer for the state and is the
workers' compensation insurer of last resort. Most of the
policyholders are small to medium size businesses that
cannot secure workers' compensation insurance in the
private market. The SCIF provides protection for thousands
of California workers. The management of this fund should
be above question and it is important to these
policyholders and their workers that the integrity of the
fund be above reproach. These modest reforms limit the
influence of those who are no longer on the Board of
Directors or in the employment of the fund as well as allow
for a dialogue about the awarding of consulting contracts
to former staff and board-members."
ASSEMBLY FLOOR :
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall, Bill
Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Cedillo, Chesbro, Conway, Cook, Davis, Dickinson,
Donnelly, Eng, Feuer, Fletcher, Fong, Fuentes, Galgiani,
Gatto, Gordon, Grove, Hagman, Halderman, Hall, Harkey,
Hayashi, Roger Hernández, Hill, Huber, Hueso, Huffman,
Jeffries, Knight, Lara, Logue, Bonnie Lowenthal, Ma,
Mansoor, Mendoza, Miller, Mitchell, Monning, Morrell,
Nestande, Norby, Olsen, Pan, Perea, V. Manuel Pérez,
Portantino, Silva, Skinner, Smyth, Solorio, Swanson,
Torres, Valadao, Wagner, Wieckowski, Williams, Yamada,
John A. Pérez
NO VOTE RECORDED: Furutani, Garrick, Gorell, Jones,
Nielsen, Vacancy
JJA:do 6/9/11 Senate Floor Analyses
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SUPPORT/OPPOSITION: SEE ABOVE
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