BILL ANALYSIS Ó
SB 1451
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SENATE THIRD READING
SB
1451 (Mendoza)
As Amended June 14, 2016
Majority vote
SENATE VOTE: 34-1
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Insurance |13-0 |Daly, Melendez, | |
| | |Travis Allen, | |
| | |Bigelow, Calderon, | |
| | |Chu, Cooley, Cooper, | |
| | |Dababneh, Dahle, | |
| | |Frazier, Gatto, | |
| | |Rodriguez | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Appropriations |18-0 |Gonzalez, Bigelow, | |
| | |Bloom, Bonta, | |
| | |Calderon, Chang, | |
| | |Daly, Eggman, | |
| | |Gallagher, | |
| | | | |
| | | | |
| | |Roger Hernández, | |
SB 1451
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| | |Holden, Jones, | |
| | |Obernolte, Quirk, | |
| | |Santiago, Wagner, | |
| | |Weber, Wood | |
| | | | |
| | | | |
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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.
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.
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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, nine of whom are gubernatorial appointees, and two
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: According to the Assembly Appropriations
Committee, negligible state costs. SCIF is a quasi-governmental
entity, but it is funded by policyholder premiums and investment
earnings from those premiums, not state funds. SCIF reports
that in some cases, the ability to create exempt positions
instead of relying on consultant contracts could provide
administrative cost savings.
COMMENTS:
1)Purpose. According to the author, the SCIF board needs the
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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), Chapter 322, Statutes of 2008 - 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), Chapter 309, Statutes 2013, 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 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
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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.
Analysis Prepared by:
Mark Rakich / INS. / (916) 319-2086 FN: 0003588