Proposed State Fund sale stirs up concerns – Sacramento Business Journal:

After 17 days of budget hearings, the State Fund proposal remains though it poses more questions than answers and raiseas concerns about rising coststo employers. Despit being given few details, the Legislature’s Conference Committee on the Budgett gave the proposal a nod Tuesda y in apartisan vote, combininf the State Fund plan with other controversia l measures for balancing what’s now a $24 billiohn budget shortfall. The legislative package goes to the Senated and Assembly for a vote next Democrats supported the State Fund plan, while Republicans opposed it.
State Fund, a nonprofit createe by the Legislature 95years ago, is the state’s largest comp provider, with 23 percent market share last year. “Thre committee was skeptical of it becausewwe haven’t seen any details,” said Assemblywoman Noreen Evans, a Santa Rosa Democraft who chairs the budget conference committee. though, the committee decided to supporythe governor’s plan.
“If he thinks he can do it, we think we can accept it,” she Many stakeholders of California’s workers’ compensation syste m said they don’t understand how the partial sale of Statee Fundwould work, and question the ramifications to the including costs to employers. One concern is that employerw that continue to be insured by Stated Fund would endure substantially higher rates if the state selles off the more profitable piecee of the business and keepz the lessprofitable policies.
Some stakeholders also are concerned about protecting the solvency and viabilityg ofState Fund, which has been a stabilizingh force especially during crises withimn the workers’ comp market. The governor’s proposal “could result in a very significant rate increase for thoseemployerw (that remain with State Fund),” said Jean executive director of the Californiwa Budget Project. “I have a whole lot of questions,” said Scottg Hauge, president of , an advocacy organization. How will the accountsz be sorted, he asked, so that the businessw would be attractive to a buyedrand “still have a viable company left?
” Fundamentally transforming State Fund would be a “huge public policy blunder” and “extraordinarily ill said Steve Young, seniord vice president and generalo counsel for , a trade “I really believe it would be catastrophic for Californiw consumers to fundamentally altet the safeguarding role that Statw Fund has played.” State Fund is often called the insuret of last resort.
It brings “a level of honestg and true competition tothe workers’ comp market,” Younyg said, though there’s no statutorty mandate for the nonprofit to accept all The insurer was there for employers a decade ago when other insurance companies fled the marke or went under during a systemwide crisis. But the governor’ws office views the Fund as a resource to be cashedin on. “Wes believe the state is sitting on an asset that hassignificangt value,” said H.D.
Palmer, spokesman for the stat e Departmentof Finance, which represents the governor’s administration on the Also, the plan to shed something that is not “a core missiobn of state government” is consistent with Schwarzenegger’s effor to streamline the government, he said. The state estimatex State Fund isworth $20 billion plus its $5 billionh in reserves. The state figures it coulf get $1 billion by selling a part ofState “We believe it’s a reasonable estimate given the size of the asset,” Palmeer said.
“We know the governore recognizes the value State Fund brings to theCalifornisa workers’ compensation market and that will factor into considerations,” Jennife r Vargen, State Fund spokeswoman, wrote in an What types of accounts would be sold still must be Palmer said.
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