BILL ANALYSIS
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THIRD READING
Bill No: AB 1447
Author: John A. Perez (D)
Amended: 6/4/09 in Senate
Vote: 21
SENATE BANKING, FINANCE, AND INS. COMMITTEE : 10-0, 6/17/09
AYES: Calderon, Cogdill, Correa, Cox, Harman, Kehoe, Liu,
Lowenthal, Runner, Wolk
NO VOTE RECORDED: Florez, Padilla
SENATE GOVERNMENTAL ORG. COMMITTEE : 11-0, 7/8/09
AYES: Wright, Harman, Benoit, Calderon, Denham, Florez,
Negrete McLeod, Padilla, Price, Wyland, Yee
NO VOTE RECORDED: Oropeza, Wiggins
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 73-0, 5/14/09 - See last page for vote
SUBJECT : State Compensation Insurance Fund: audits
SOURCE : Author
DIGEST : This bill clarifies that the State Compensation
Insurance Fund (SCIF) is a state agency for purposes of the
Bureau of State Audits and its audit, evaluation and
investigatory jurisdiction. In addition, this bill
requires all SCIF advertising include a disclaimer
indicating it is self-supported and not funded by the State
of California.
CONTINUED
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ANALYSIS : Existing law establishes the Bureau of State
Audits (BSA) under the direction of the Milton Marks
"Little Hoover" Commission on California State Government
Organization and Economy and requires the BSA to be
independent of the executive branch and legislative control
in order to be free of organizational impairments to
independence.
Existing law states that the duties of the BSA are to
examine and report annually upon the financial statements
prepared by the executive branch of the state and to
perform performance audits, as mandated.
Existing provisions of the Insurance Code establish that
the SCIF is not subject to statutory provisions made
applicable to state agencies unless the section
specifically names the fund as an agency to which the
provision applies. Exception is made specifically for,
among others, provisions of the Government Code relating to
the State Auditor.
Existing law requires any advertising of the SCIF to
include a disclaimer stating that the SCIF is not a branch
of the State of California.
This bill:
1. Adds a new provision to the Government Code that
declares the SCIF is a state agency for purposes of the
provisions of the Government Code establishing the BSA
and its duties and authority, as specified.
2. Modifies an existing provision of the Insurance Code to
require that all SCIF advertising include the following
disclaimer: "The State Compensation Insurance Fund is
self-supported and is not funded by the State of
California."
Background
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
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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.
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.
Senate Bill 37 (Maddy) Chapter 12, Statutes of 1993,
(Government Code 8543), created the BSA as part of the
Executive Branch. To assure its independence, the BSA is
free from the control of the Executive and Legislative
branches; the Milton Marks "Little Hoover" Commission
oversees its administrative operations. The BSA, under the
direction of the State Auditor, performs an annual
examination (single audit) of the State's general-purpose
financial statements as prepared by the State Controller's
Office. The federal government, as a condition of
receiving federal funds, requires this audit. The single
audit also includes a review of major federal programs for
compliance with federal laws and regulations, and
recommendations to improve the State's financial systems
and internal control.
The BSA also conducts financial and performance audits as
directed by statute, and other government audits requested
by the Joint Legislative Audit Committee. The BSA has the
explicit authority to audit any entity that receives state
funds. Consequently, it sometimes audits at the local
government level.
Prior/Related legislation
AB 567 (Villines) 2009-10 Session , creates a "Clearinghouse
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for Government Innovation and Improvement Program" within
the BSA to solicit recommendations from the public for
improving state operations and make specified modifications
to the California Whistleblower Protection Act including
certain other changes to the operations of the BSA.
AB 540 (Monning) 2009-10 Session , requires the BSA to
provide the Department of Finance with the BSA's budget for
each fiscal year. Also, would require the Department of
Finance to include the budget, without modification, in the
Governor's annual budget.
AB 539 (Monning) 2009-10 Session , clarifies existing law
and codifies current practices related to the BSA.
SB 1452 (Speier), Chapter 452, Statutes of 2006 , updated
the auditing standards for state and local agencies and set
up a process whereby the Legislature would be informed when
auditor recommendations are being ignored or not
implemented by state agencies. Also, it protected auditors
from intimidation while providing them with a process to
have audit expectations reported to agency counsel if audit
findings are suppressed by management.
SB 521 (Wyland), 2007-08 Session , would have transferred
audit and evaluation duties within the Department of
Finance to the BSA and renamed the BSA as the Bureau of
State Audits and Evaluations.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
ASSEMBLY FLOOR :
AYES: Adams, Anderson, Arambula, Beall, Bill Berryhill,
Tom Berryhill, Blakeslee, Block, Blumenfield, Brownley,
Buchanan, Caballero, Charles Calderon, Carter, Chesbro,
Conway, Cook, Coto, Davis, De La Torre, De Leon, DeVore,
Duvall, Emmerson, Eng, Evans, Feuer, Fletcher, Fong,
Fuller, Furutani, Galgiani, Gilmore, Hagman, Hall,
Harkey, Hayashi, Hernandez, Hill, Huber, Huffman,
Jeffries, Jones, Knight, Krekorian, Lieu, Logue, Bonnie
Lowenthal, Ma, Mendoza, Miller, Monning, Nava, Nestande,
Niello, Nielsen, John A. Perez, V. Manuel Perez,
Portantino, Price, Ruskin, Salas, Silva, Skinner,
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Solorio, Audra Strickland, Swanson, Torlakson, Torres,
Torrico, Tran, Villines, Yamada
NO VOTE RECORDED: Ammiano, Fuentes, Gaines, Garrick,
Saldana, Smyth, Bass
JJA:do 7/22/09 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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