BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 1897
                                                                  Page  1

          Date of Hearing:   May 12, 2010

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

                    AB 1897 (Jones) - As Amended:  April 27, 2010 

          Policy Committee:                              InsuranceVote:8-4

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              

           SUMMARY  

          This bill repeals provisions established by ABX4 12, Chapter 12,  
          Statutes of 2009. Specifically, this bill repeals the authority  
          of the Director of Finance to sell a portion of the State  
          Compensation Insurance Fund (SCIF). This bill also requires  
          governor's appointees to the board of SCIF to be subject to  
          Senate confirmation. 

           FISCAL EFFECT  

          Unknown foregone GF revenue of up to $1 billion by eliminating  
          the authority to sell a portion of SCIF. Although no sale of  
          SCIF has proceeded and the viability and legality of such a sale  
          has been questioned, the Department of Finance assumed GF  
          revenues of $1 billion when the authority eliminated in this  
          bill was established. Since that time, the assumed revenues have  
          been eliminated from the budget, but the possibility of a sale  
          remains.

           COMMENTS  

            1) Rationale  . This bill eliminates recent authority established  
             in the budget act to sell a portion of SCIF and to modify the  
             governance of the board of SCIF by requiring governor's  
             appointees to be subject to Senate confirmation. 

            2) Background  . California employers must provide workers'  
             compensation benefits to their employees under state labor  
             law. Employers must purchase workers' compensation insurance  
             from either a licensed insurance company, or through SCIF, or  
             employers may choose to self-insure, which means they use a  
             pay-as-you go model, paying benefits to and on behalf of  








                                                                  AB 1897
                                                                  Page  2

             workers as the costs are incurred. SCIF, created by the  
             Legislature in 1914, is the insurer of last resort in  
             California's private insurance market and is now the largest  
             workers' compensation insurer in the country. The SCIF board  
             has 11 members, nine of whom are appointed by the governor.  
             The other two members are appointed by the Legislature. 

          3)       Related Legislation  . AB 1874 (Coto), Chapter 322,  
            Statutes of 2008 changed the board of SCIF from five members  
            to 11 members. 


           Analysis Prepared by  :    Mary Ader / APPR. / (916) 319-2081