Governor Sees 10% Workers’ Comp Rate Drop as Good Sign

Gov. Arnold Schwarzenegger said Saturday that he was not alarmed by the comparatively small drop in rates charged by the government-backed fund that sells workers’ compensation insurance, predicting steeper declines once his overhaul of the system takes hold.

Schwarzenegger had said rates would drop by 30% after a major revamping of a system blamed for driving businesses out of California.

But the State Compensation Insurance Fund, which writes more than half of the workers’ comp policies statewide, had cut its rate by 9.9% since the second half of 2003, according to a filing Friday with the state Department of Insurance. With such a large piece of the market, the state fund serves as something of a pacesetter for the industry when it comes to rates.

Schwarzenegger said the reduction is a good sign and he vowed that rates would drop further still when the full force of his overhaul kicks in.

Over the next year, he said, reductions will be “gradual” but significant.

Speaking to reporters after a helicopter tour of nearby flooding caused by a levee break, Schwarzenegger said, “The fact of the matter is, this was the first step of many reductions in the workers’ compensation costs.”

Come January, he said, “you’ll see tremendous cost reductions.”

During the appearance, he also spoke about a proposal to issue driver’s licenses to undocumented immigrants.

For Schwarzenegger, the fluctuations in workers’ comp rates are not just a dry business statistic. They are a measure of the success of a workers’ comp reform package billed as the fulfillment of a campaign promise.

If rates do not drop to promised levels, it would amount to a political setback for a governor who led the workers’ comp negotiations that culminated in April with a celebratory bill-signing at a Boeing Co. plant in Long Beach.

In an interview Saturday, Assembly Speaker Fabian Nunez (D-Los Angeles) said he was disturbed that the state fund did not cut its rates more. He said he does not share the governor’s view that the reduction was a harbinger of more cuts.

Nunez said Schwarzenegger’s position “is an optimistic way to look at it.

“The state fund ought to reduce rates more, and I think it’s inconsistent with the promise that with workers’ comp reform comes rate relief. We want to see real rate relief,” Nunez said. “A 10% reduction to businesses that have seen their rates grow by 200% over the last five years is not acceptable.”

Speaking on the driver’s license issue, Schwarzenegger said he is confident that he and legislative proponents of licenses for illegal immigrants will reach a compromise.

Months of negotiations on the politically sensitive issue have failed to produce a consensus.

Schwarzenegger has voiced fears that issuing the driver’s licenses -- often used as proof of identity -- could compromise security.

On Saturday, though, he mentioned an alternative.

Even if no solution were found to guarantee that the licenses would not be abused, he said, the state could come up with a license explicitly designated “for driving legally -- but not to be used for anything else.”

Such a license could not be used, for example, as proof of identification for boarding planes or opening bank accounts, he said.

“One way or the other we will do it, and that’s why we’re negotiating,” he said. “I’m very optimistic that it will be done. It’s just a matter of time.”

On that point, Nunez agreed.

“I think the governor really wants to do it,” he said.