BILL ANALYSIS Ó
SB 1451
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SENATE THIRD READING
SB
1451 (Mendoza)
As Amended August 4, 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, | |
| | |Holden, Jones, | |
| | |Obernolte, Quirk, | |
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| | |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 eight of these
additional executive and management positions.
3)Specifies that these positions shall be in the areas of
underwriting, technology, claims, finance, or actuarial.
4)Provides that no more than two of these positions may be
licensed attorneys.
5)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.
EXISTING LAW:
1)Establishes SCIF as a quasi-state entity, generally subject to
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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 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: Because SCIF is 100% funded by policyholder
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
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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, 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 (Insurance Committee), 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 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
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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.
Analysis Prepared by:
Mark Rakich / INS. / (916) 319-2086 FN: 0003589