BILL ANALYSIS Ó
SB 1451
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Date of Hearing: June 22, 2016
ASSEMBLY COMMITTEE ON INSURANCE
Tom Daly, Chair
SB
1451 (Mendoza) - As Amended June 14, 2016
SENATE VOTE: 34-1
SUBJECT: State Compensation Insurance Fund: executive and
management appointments
SUMMARY: Authorizes the Board of Directors of the State
Compensation Insurance Fund (SCIF) to convert civil service
positions into exempt positions. Specifically, this bill:
1)Authorizes the board of directors (board) of SCIF to appoint
additional executive and management positions, as deemed
appropriate by the board.
2)Provides that the board may establish up to 40 of these
additional executive and management positions.
3)Provides that the board may set the salary for these
additional executive and management positions, and that these
employees are not subject to the civil service or state
contracting rules that might otherwise apply.
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4)Provides that the board's authority to appoint these
additional executive and management employees terminates on
December 31, 2021.
EXISTING LAW:
1)Establishes SCIF as a quasi-state entity, generally subject to
the civil service laws applicable to state agencies.
2)Provides that SCIF is a workers' compensation insurer that is
authorized to compete in the market with private insurers,
that also serves as the insurer of last resort for employers
that are unable to obtain workers' compensation insurance from
private insurers.
3)Provides that SCIF is governed by an 11 member board of
directors, 9 of whom are gubernatorial appointees, and 2 of
whom are Legislative appointees.
4)Authorizes the board to appoint the following 11 exempt
officers: 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.
5)Provides that these 11 employees are exempt from the normal
civil service rules that govern SCIF employees, and authorizes
the board to set their salaries.
FISCAL EFFECT: Because SCIF is 100% funded by policyholder
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premiums and investment earnings from those premiums, its costs
have no impact on either the General Fund or any Special Fund.
The Senate Appropriations Committee referred this bill to the
Senate Floor pursuant to Senate Rule 28.8.
COMMENTS:
1)Purpose. According to the author, the SCIF board needs the
flexibility to create additional exempt management positions,
allowing it the ability to avoid hiring costly and ultimately
temporary consultants, without having to come to the
Legislature to approve each new position. Providing the SCIF
board the authority to fill these positions with appointed
employees will allow the organization to respond more quickly
to the market and accelerate progress through a multi-year
business transformation that more effectively supports
California's workers, economy, and businesses by creating more
stability in the marketplace.
2)History of exempt SCIF employees. Until 2009, SCIF had only
one exempt position-the president and CEO. In 2008, AB 1874
(Coto) - Statutes 2008, Chapter 344 - authorized six
additional specific exempt positions: a chief financial
officer, chief operating officer, general counsel, chief
information technology officer, chief investment officer, and
chief risk officer. In 2013, AB 1394 (Committee on Insurance)
- Statutes 2013, Chapter 309 -- added a chief medical officer,
chief actuarial officer, chief claims operations officer, and
chief of internal affairs to the list of specific exempt
positions. In the case of each of these bills, SCIF made
specific arguments to the Legislature why these additional
exempt positions were appropriate. The Legislature agreed
with these proposals, and approved the expansion of exempt
employees. On the other hand, in 2012, SB 1406 (Emmerson)
proposed to expand the number of exempt employees SCIF could
employ by granting discretion to the board. After several
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iterations, SB 1406 was held in the Senate Appropriations
Committee. Notably, the year after SB 1406 was held, SCIF
returned to the Legislature with AB 1394 and a "specific
authorization" proposal.
3)Managerial flexibility. SCIF is the largest workers'
compensation insurer in California, currently writing
approximately 12% of the insured market. Historically, it has
been forced by market conditions to write substantially more
than 12% -- at one point exceeding 50% of the market. A
private insurer of this magnitude would have a substantial
number of highly paid employees with high degrees of specific
expertise. This bill is designed to enable more efficiency,
better operations, and ultimately better results for
California employers.
4)Sunset (sort of). The bill contains a date - December 31,
2021 - after which the discretion of the SCIF board to create
additional exempt positions terminates. However, that
language is not really a sunset clause in the traditional
sense, because any positions already created would continue to
exist past that date. It is the authority to create the
positions, not the positions themselves, that sunsets
REGISTERED SUPPORT / OPPOSITION:
Support
State Compensation Insurance Fund
SB 1451
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Opposition
California Attorneys, Administrative Law Judges and Hearing
Officer in State Employment (CASE)
Analysis Prepared by:Mark Rakich / INS. / (916)
319-2086