BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 1451|
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UNFINISHED BUSINESS
Bill No: SB 1451
Author: Mendoza (D)
Amended: 8/4/16
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
SENATE FLOOR: 34-1, 5/9/16
AYES: Allen, Anderson, Berryhill, Block, Cannella, De León,
Fuller, Galgiani, Hall, Hancock, Hernandez, Hertzberg, Hill,
Hueso, Huff, Jackson, Lara, Leno, Leyva, Liu, McGuire,
Mendoza, Mitchell, Monning, Moorlach, Morrell, Nguyen, Pan,
Pavley, Roth, Stone, Vidak, Wieckowski, Wolk
NOES: Glazer
NO VOTE RECORDED: Bates, Beall, Gaines, Nielsen, Runner
ASSEMBLY FLOOR: 79-0, 8/18/16 - See last page for vote
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 8 additional
exempt senior management employees in the areas of underwriting,
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Page 2
technology, claims, finance, and actuary, and no more than 2 of
those positions may be filled with licensed attorneys.
Assembly Amendments reduce the number of new exempt executive
and management positions the board is authorized to appoint from
no more than 1% of the Fund's civil service employees (currently
approximately 44) to no more than 8, specified that the
positions must be in specific areas of expertise, and eliminate
the sunset on the new appointing authority.
ANALYSIS:
Existing law:
1)Establishes State Fund, a quasi-state agency, for the purpose
of transacting workers' compensation insurance, to be
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 Fund and its board and
appointed employees;
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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 to appoint 8 additional
exempt senior management employees in the areas of underwriting,
technology, claims, finance, and actuary, and no more than 2 of
those positions may be filled with licensed attorneys.
Background
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.
Most of State Fund's employees are civil servants. State Fund's
board currently has statutory authority to appoint 11 exempt
officers: president and CEO, chief financial officer, chief
operating officer, general counsel, chief information technology
officer, chief investment officer, chief risk officer, chief
medical officer, chief actuarial officer, chief claims
operations officer, and chief of internal affairs. State Fund
had cited its need to have more flexibility with its workforce
and salaries to help it operate more efficiently and effectively
in the workers' compensation marketplace. It is the largest
workers' compensation insurer in California, currently writing
approximately 12% of the market. Its share has fluctuated
significantly, and at one point as a result of severe market
disruptions, its share exceeded 50% of the market. A private
insurer of this magnitude would have a number of highly paid
employees with high degrees of specific expertise. This bill is
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designed to facilitate greater efficiencies, better operations,
and ultimately better results for California employers.
According to State Fund, many of these positions have been
filled with outside consultants and as a result of this new
authority to fill these positions with exempt employees, State
Fund expects to have a net savings.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
According to the Assembly Appropriations Committee, because
State Fund 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.
SUPPORT: (Verified8/18/16)
State Compensation Insurance Fund (source)
OPPOSITION: (Verified8/18/16)
None received
ASSEMBLY FLOOR: 79-0, 8/18/16
AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,
Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke,
Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley,
Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth
Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto,
Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper,
Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine,
Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty,
Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell,
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Olsen, Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas,
Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner,
Waldron, Weber, Wilk, Williams, Wood, Rendon
NO VOTE RECORDED: Roger Hernández
Prepared by: Erin Ryan / INS. / (916) 651-4110
8/19/16 19:21:51
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