BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 1451|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
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THIRD READING
Bill No: SB 1451
Author: Mendoza (D), et al.
Amended: 5/3/16
Vote: 21
SENATE INSURANCE COMMITTEE: 6-1, 4/13/16
AYES: Roth, Gaines, Hall, Liu, Mitchell, Wieckowski
NOES: Glazer
NO VOTE RECORDED: Berryhill, Hernandez
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
SUBJECT: State Compensation Insurance Fund: executive and
management appointments
SOURCE: State Compensation Insurance Fund
DIGEST: This bill allows the State Compensation Insurance Fund
(State Fund) board of directors (board) to appoint additional
executive and management positions, not to exceed 1 percent of
the number of the Fund's civil service employees; and sunsets
that authority on December 31, 2021.
Senate Floor Amendments of 5/3/16 are technical and add
co-authors.
ANALYSIS:
Existing law:
1)Establishes State Fund, a quasi-state agency, for the purpose
of transacting workers' compensation insurance, to be
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administered by a board with full power, authority and
jurisdiction to conduct the business of the fund;
2)Directs State Fund to be fairly competitive with other
insurers, and states the intent of the Legislature that it be
neither more nor less than self-supporting;
3)Requires the board to appoint a president, chief financial
officer, chief operating officer, chief information technology
officer, chief investment officer, chief risk officer, general
counsel, chief medical officer, chief actuarial officer, chief
claims operations officer and chief of internal affairs; and
specifies that these positions are not subject to otherwise
applicable provisions of the Government Code and the Public
Contract Code (exempt non-civil service positions);
4)Specifies that the Milton Marks Postgovernment Employment
Restrictions Act applies to the State Fund and its board and
appointed employees;
5)Specifies that the board and appointed officers are prohibited
from lobbying State Fund for two years after leaving
employment with State Fund.
This bill allows the State Fund board of directors to appoint
additional executive and management positions, not to exceed 1
percent of the number of the Fund's civil service employees; and
sunsets that authority on December 31, 2021.
Comments
State Fund was created by statute in 1914 to act as a workers'
compensation insurer for the state and to serve as the workers'
compensation insurer of last resort in the private market. It
also serves as a Third Party Administrator (TPA) for
self-insured public and private employers. The State of
California is its largest TPA client. Although created by the
Legislature, it is operated as a private non-profit enterprise,
and is supposed to be "neither more nor less than
self-supporting." The State of California is not liable for any
obligations of State Fund. It is regulated by the California
Department of Insurance as a private insurer, but has only such
authorities as are granted by statute.
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State Fund's market share has fluctuated from a record high of
53% in 2000-2001 to a low of 10% in 2012, depending on the
condition of the market. At the same time, State Fund's
workforce is part of the civil service, entitled to the same job
protections as other state workers. Until 2009, it had only one
exempt position-the president and CEO. An audit in 2007
uncovered serious operational and managerial improprieties, and
criticized State Fund's poor business and accounting practices
and lack of a functional management team. In response, AB 1874
(Coto, Chapter 322 Statutes of 2008) granted State Fund six
additional exempt positions, including a chief financial
officer, chief operating officer, general counsel, chief
information technology officer, chief investment officer, and
chief risk officer. SB 1145 (Machado, Chapter 344 Statutes of
2008) made State Fund subject to the Bagley-Keene open meeting
law. In 2013, AB 1394 (Committee on Insurance, Chapter 309
Statutes of 2013) added a chief medical officer, chief actuarial
officer, chief claims operations officer, and chief of internal
affairs to the list of exempt positions.
State Fund currently has approximately 4,400 employees, allowing
it to appoint up to 44 new positions under this bill. According
to State Fund President Vernon Steiner, positions they propose
to fill with this new authority include a chief counsel, chief
underwriting officer, chief information security officer, chief
technology officer, chief administrative officer, senior vice
president for premium audit, and senior vice president for
safety and loss prevention. Many of these positions have been
filled with outside consultants. As a result of this new
authority to fill these positions with employees, State Fund
expects to have a net savings of at least $1.7 million.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
SUPPORT: (Verified5/4/16)
State Compensation Insurance Fund (source)
OPPOSITION: (Verified5/4/16)
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None received
ARGUMENTS IN SUPPORT: State Fund has sponsored SB 1451
because it will expand its ability to attract and retain staff
with industry experience and specific expertise to continue its
business transformation and respond effectively to market
demands and changes. State Fund needs the ability to compete
with the private market for such talent to bolster capabilities
throughout the organization. This legislation will allow it to
pursue management changes without having to seek legislative
approval for each individual position.
Prepared by:Erin Ryan / INS. / (916) 651-4110
5/4/16 14:58:06
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