Reforms Proposed by Panel to Spur State’s Economy : Government: California teeters on precipice and must find ways to keep and create jobs, says Chairman Peter Ueberroth. Democrats call suggestions old ideas.

Seeking to rejuvenate California’s tired economy, a blue-ribbon panel chaired by former Olympics czar Peter V. Ueberroth on Thursday recommended an ambitious redesign of California government--including its regulatory, education and legal systems--in an effort to attract and retain jobs for an expanding population.

“We’re frightened about this state’s future,” Ueberroth told reporters before releasing the lengthy report of his 17-member Council on California Competitiveness, which was created by Gov. Pete Wilson last December as a centerpiece of his Administration.

“We started out being worried and we ended up with a conclusion that things are much worse than we expected, much worse than you know. . . . We’re on the precipice and about ready to drop off.”

“The simple crux of the problem,” Ueberroth said, is that California--already the nation’s most populous state by far--continues to grow by 600,000 people per year. “Any dummy knows that it costs a lot of money to take care of those people. . . . To pay for those people you need 250,000 to 300,000 net new jobs. Last year, we lost 340,000 jobs. (And) the jobs that are staying in the state, the salary levels are going down.”

Although “California’s job hemorrhage is partly the result of the recession and cutbacks in defense and aerospace,” the council’s report said, “the major problems besetting California are self-inflicted. Through our indifference to the need for job creation in this state, we are crippling ourselves.”

“The perception is becoming widely shared that California is a bad place to do business.”

The council’s 17 members were drawn primarily from the business community, but also included two labor leaders. Among the panel’s thick catalogue of recommendations for “a 12-month urgent action program” were these:

* Restrict eligibility for workers’ compensation benefits and repeal a law that limits competition among insurers. The council said the workers’ compensation system “is a national disgrace because of its tolerance of fraud and abuse.”

* Lengthen the school year from 180 to 200 days and add an extra hour each day. Expand vocational programs for high school students who decide that they do not want to go to college.

* Create tax credits for businesses that invest in pollution control machinery and repeal the capital gains tax on new investments in companies with fewer than 500 employees that are held for three or more years.

* Streamline regulation of business by providing “one-stop shopping” for permits.

* Give business more favored treatment in the legal system by repealing the Corporate Criminal Liability Act, limiting punitive damages and keeping lawsuit settlements confidential.

* Create a State Office of Management and Budget, similar to the federal agency, to oversee state finances, and appoint a commission to redesign California government at all levels to make it more responsive to business and industry.

Most of the recommendations would require bills by the Legislature. Some can be implemented by the governor himself.

But in Sacramento, as in Washington--two seats of government that Ueberroth seemed scornful of on Thursday--ideas are cheap. Implementation is the hard part. And many of the recommendations are being--or have been--debated by the Legislature.

The Democrats who control the Legislature generally were unimpressed by the council’s report. Assembly Speaker Willie Brown of San Francisco skipped a briefing by Ueberroth because, he said, he had other things to do.

State Sen. Bill Lockyer of Hayward, chairman of the Senate Judiciary Committee, said most of the recommendations he saw in the report had been offered previously by the business community.

“This is some of the best thinking of the 17th Century,” he said.

Senate Republican Leader Ken Maddy of Fresno praised the report but noted that many of its recommendations have been part of Republican-sponsored legislation rejected by Democrats. He said he is willing to accept some measures he might not agree with, but only if Democrats also bend on issues important to them and their backers.

“Maybe Mr. Ueberroth and some of these other people will learn how difficult it is and who is responsible for the business climate we have in this state,” Maddy said. “It’s the Democratic majorities.”

But Lockyer said the panel’s ideas have been rejected by Democrats because they would tilt the system toward corporate profits and away from consumer protection. “This is the same old stuff the business special interests peddle year after year,” he said.

One recommendation likely to win wide support in the Legislature is repeal of the state’s minimum-rate law for workers’ compensation insurance. The law’s purpose is to guarantee that insurance companies cover their expenses and earn a profit. It does this by requiring the state insurance commissioner to set a premium level below which insurance companies cannot charge. That effectively prevents companies from competing for business by charging less than their competitors.

Ueberroth was adamant about repealing this law and, in fact, the former major league baseball commissioner borrowed language from the sport to emphasize the depth of his feeling. “The insurance minimum rate protection--Out!” he bellowed to reporters. “Out with that!”

Wilson said he will support its repeal.

Democrats a year ago demanded repeal of the law as part of a deal with Republicans, who wanted to limit the ability of workers to collect stress disability payments. But Republican lawmakers and Wilson, responding to pressure from the insurance industry, rejected the deal because they could not accept the rate law repeal.

On Thursday, Democratic Assemblyman Burt Margolin of Los Angeles, chairman of the Assembly Insurance Committee, called Wilson’s turnaround a “major breakthrough.”

On education, Sen. Gary K. Hart of Santa Barbara, chairman of the Senate Education Committee, said he doubted the wisdom of sending children to a flawed school system for 20 more days a year and for an hour longer each day. He said the proposal probably would cost at least $2 billion a year, though the Ueberroth panel neither attached a dollar figure to its recommendation nor suggested a source of the money.

The council tried to calm environmentalists’ fears that streamlining regulations would lessen ecological protections. “California cannot restore its competitiveness by allowing the degradation of its environment,” the report said, while adding that the state “must also have a healthy economy to produce and retain jobs and to supply resources for investment in environment, education, infrastructure and other social needs.”

But a spokeswoman for the Sierra Club said parts of the report are “laughable.”

“They want us to compete with other states for the amount of lung cancer and cancer-causing chemicals in our environment,” said Teresa Schilling, the group’s public affairs manager. “I don’t think that’s the kind of competition we want to get into.”

Few interest groups had an opportunity Thursday to react to the report of 100-plus pages because Ueberroth kept it tightly under wraps before releasing it. He did not even brief Wilson on the council’s recommendations until Wednesday night.

“This is a first-class piece of work--even if I haven’t had the opportunity to read it,” Wilson told reporters. “I suspect I will agree with about 98% of it.”

Ueberroth, who has toyed at various times with running for high public office, clearly upstaged the governor at the Capitol news conference.

He dominated the podium and at various points grabbed the microphone while the governor was attempting to answer questions. During the few times that Wilson did answer questions, Ueberroth often was behind him talking to other council members.

Business’ Biggest Concerns

The Council on California Competitiveness, commissioned by Gov. Pete Wilson and headed by Olympics organizer Peter Ueberroth, was asked to find ways to lead California out of its economic slump. Here are the major areas of concern identified by the commission and some of its recommendations: High Corporate Income Taxes Sampling of corporate income taxes by state, 1989-1990 collections per capita California: $164.52 New York: $104.73 Utah: $54.46 Oregon: $51.65 Arizona: $48.85 New Mexico: $40.61 Colorado: $37.36 Nevada: $0.0 Washington: $0.0 Texas: $0.0 Recommendations for change: -Crack down on workers’ compensation fraud and limit job-stress claims. -Create a one-stop environmental review process. -Cut capital gains tax on new investments in small companies. -Allow parental choice of childrens’ schools. -Revamp legal system to eliminate frivolous lawsuits and encourage arbitration. Other key problems identified in the report: -Burdensome regulation and environmental rules that fail to balance jobs and costs with results. -An education system that costs too much and fails to train workers. -A legal system that allows expensive, protracted and often unwarranted litigation.