BILL ANALYSIS
SENATE COMMITTEE ON BANKING, FINANCE,
AND INSURANCE
Senator Ronald Calderon, Chair
AB 1447 (John A. Perez) Hearing Date: June 17, 2009
As Amended:June 4, 2009
Fiscal: Yes
Urgency: No
SUMMARY Specifies that the State Compensation Insurance Fund
is a state agency for purposes of the Bureau of State Audits and
its audit, evaluation and investigatory jurisdiction while
imposing a requirement that all State Compensation Insurance
Fund advertising include a disclaimer indicating it is
self-supported and not funded by the State of California.
DIGEST
Existing law
1. California's Bureau of State Audits is authorized to conduct
audits of state agency operations to evaluate their performance,
operations, and the effectiveness of managerial and legal
compliance systems.
2. Insurance Code provisions governing the State Compensation
Insurance Fund provide that it is exempt from various provisions
of the Government Code with specified exceptions.
3. Among the listed exceptions, the Insurance Code provides that
the State Compensation Insurance Fund is subject to those
portions of the Government Code setting forth the Bureau of
State Audits law.
This bill
1. Amends the Bureau of State Audits law to provide expressly
that the State Compensation Insurance Fund is a state agency
as that term is defined in the Government Code.
2. Adds a requirement to the Insurance Code that requires all
AB 1447, Page 2
State Compensation Insurance Fund advertising to include a
disclaimer that "The State Compensation Insurance Fund is
self-supported and is not funded by the State of
California".
COMMENTS
1. Purpose of the bill This bill's purpose is to provide
express recognition within the Bureau of State Audits law
that for purposes of its jurisdiction, the State
Compensation Insurance Fund is an agency under California
law that is subject to audit.
2. The bill also adds a new requirement to that all SCIF
advertising disclaim any perception that SCIF's insurer
operations are supported financially by the State of
California.
3. According to the author, prior legislation has not fully
removed the ambiguity with respect to SCIF and the
jurisdiction of the Bureau of State Audits. AB 1447 is
intended to make explicit in state law that the State
Compensation Insurance Fund is a state agency as defined in
Government Code Section 11000 for purposes of the Bureau of
State Audits law and thus subject to the same oversight
requirements of any other state agency. This will ensure
that the people of California know they are being served as
well as possible by the agency whose primary responsibility
is to provide a workers compensation source of last resort.
4. Background The State Compensation Insurance Fund (SCIF) 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,
and is now the largest workers' compensation insurer in the
country. 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
SCIF. It is not subject to competitive bidding, public
record or open meeting laws, although its 8,100 employees
are civil servants and its five member board is appointed by
the Governor.
AB 1447, Page 3
5. There have been in recent years controversies arising
between the Department of Insurance (DOI) and SCIF. SCIF
for many years insisted it was not subject to the same
scrutiny and regulation by the DOI as other insurers because
it was legislatively created. At the same time, it has
avoided the normal scrutiny of other state entities because
of its exemption from open government requirements.
6. In 2006, legislation was passed in the State Compensation
Insurance Fund portions of the Insurance Code to stipulate
that the Bureau of State Audits law in the Government Code
was among those provisions SCIF is subject to.
7. This bill can be seen as the Bureau of State Audits law
counterpart to the 2006 change to the SCIF law in the
Insurance Code. AB 1447 provides express recognition that
for purposes of the Bureau of State Audits jurisdiction, the
State Compensation Insurance Fund is a "state agency"
subject to BSA audits.
8. While AB 1447 specifies SCIF is an agency for purposes of
audit jurisdiction, there is no intention to imply that the
State of California has any financial responsibility for
SCIF operations. Accordingly, AB 1447 adds a requirement
that all SCIF advertising include the disclaimer that SCIF
is self-supported and not funded by the State of California.
9. Support . None Received
10. Opposition None Received
11. Questions None
12. Suggested Amendments . None
13. Prior Legislation SB 1542 (Speier) of 2006 amended the SCIF
law in the Insurance Code to specify that notwithstanding a
general exemption to provisions of the Government Code
pertaining to state agencies, SCIF was to be subject to the
Bureau of State Audit provisions of the Government Code. AB
1447 can be seen as a companion to that 2006 law in that it
AB 1447, Page 4
now adds an express provision to the Bureau of State Audits
law affirming that agencies jurisdiction over SCIF for audit
purposes.
POSITIONS
Support
None Received
Oppose
None Received
Consultant: (916) 651-4102