Wilson Signs Workers’ Comp Overhaul Plan

In an action that state leaders hope will put California on the road to economic recovery, the Legislature on Friday overwhelmingly approved and Gov. Pete Wilson swiftly signed a comprehensive restructuring of the state workers’ compensation system.

The action was another bipartisan step by top state political leaders to cast aside the inertia that in recent years has stymied much key legislation in Sacramento.

An effusive Wilson, signing the bills just 20 minutes after the Legislature acted, said passage of the massive overhaul demonstrated that the Democratic-controlled Legislature can “overcome gridlock in the public interest, even when progress is opposed by special interest lobbies.”

“This is the single most important job creation legislation that I have signed,” the Republican governor said. “There is no more egregious sin against California’s competitiveness than our workers’ compensation system.”

Wilson said the reform package sends a message around the world that “California is coming back.”

The new laws, most of which took effect as soon as Wilson signed the legislation, are designed to squeeze at least $1.5 billion out of the nearly $12-billion system and divide the savings equally between insurance premium relief for employers and higher cash benefits for disabled workers.

Aimed at boosting the benefits of the most seriously injured employees from $336 to $490 a week over the next four years, the savings would come at the expense of services provided by a vast network of middlemen, including doctors, vocational rehabilitation specialists, insurance carriers, lawyers and others.

For Wilson, who put reform of the employer-financed program at the top of his legislative agenda, passage of the package provided an important boost as he prepares to campaign for reelection as a man able to lead California out of the recession.

Suddenly, a summer that seemed to hold out nothing for Wilson has bloomed with two important victories: a state budget approved on time and a thorough overhaul of the 80-year-old system for compensating workers who are injured on the job.

The governor, however, avoided a direct answer when asked how long he expected the bipartisan goodwill and cooperation to last.

For years, California employers have paid insurance premiums that are among the nation’s highest while injured workers have received cash benefits that are among the lowest. Most previous efforts at comprehensive reform have fallen victim to powerful special interest lobbies.

But after mounting criticism of abuses in the system and its high costs, the Legislature and Wilson said they were determined to make fundamental changes.

The package of bills, fashioned in marathon legislative negotiations spanning nearly three months, sailed through the Assembly first with only a sprinkling of negative votes.

“This bill says, ‘Treat your employees, injured or not, in the right way and you’re going to be rewarded economically,’ ” said Assemblyman Steve Peace (D-Chula Vista), who helped write the compromise.

In the Senate, the proposal also received near-unanimous support, although some wondered how effective the reforms will be.

“We have hit the issue and time will tell whether it’s a home run or a double,” said Sen. Patrick Johnston (D-Stockton), a key negotiator.

As part of the package, the Legislature and governor also provided a $650-million bonus for employers by ordering an immediate 7% rate reduction in workers’ compensation premiums charged by insurance carriers. Insurance Commissioner John Garamendi had intended to order such a cut, but the new legislation beat him to it.

The Legislature also sent Wilson a companion bill, opposed by some segments of the insurance industry and Garamendi, that would repeal a law that virtually assures a profit for California-based insurance carriers. It would be replaced by a competitive open-market system in 1995.

Wilson, however, postponed action on the repeal measure, saying he wanted to study it further.

Overall, the reform package was enthusiastically embraced by labor and business officials. “It’s as good as we are going to get and a major step in making California competitive again,” said William Campbell, president of the California Manufacturers Assn.

Trade groups and employers in Orange County generally lauded the new law.

“California has been waiting a long time for this,” said Elizabeth Winfree-Lydon, regional manager at the Santa Ana office of the Merchants & Manufacturers Assn., a lobbying group.

“The workers’ compensation system has been something of a joke--we’ve all been discouraged about it,” she said. “This bill doesn’t have everything we wanted, but it’s a good start.”

At the Newport Harbor Area Chamber of Commerce, workers’ comp has been the members’ top concern for years, said President Richard Luehrs, and “obviously we’re delighted.”

“We’d like to see still more meaningful changes in lowering the cost of workers’ comp,” he said. “But this is probably the best we could do for business at this time.”

At the Industrial League of Orange County, which represents 1,000 local employers with 150,000 workers, President Todd B. Nicholson said: “It’s a real significant achievement.

“It’s maybe not quite as strong as we’d like it,” he said. “But the important thing is it’s a comprehensive reform instead of a piecemeal approach to a big problem.”

Said Michael Ray of J. Ray Construction Co. in Irvine, “One word: Yay!

“The reality is that workers’ comp isn’t that much worse here than it is in most other states,” said Ray, who employs 35. “But as a symbol of California getting its act together, it’s extremely important.

“The governor and the Legislature are to be commended for getting together on this.”

But just how long the compromise will endure against attack is uncertain. Some interests hit economically by the proposal--such as vocational rehabilitation--are expected to attempt to unravel parts of it as early as next month when the lawmakers return from vacation.

What made compromise possible this year was citizens’ disgust with the apparent impotence of their political leaders and pressure to improve the economy, participants in the compromise said.

Although that theme was hammered upon chiefly by Wilson, Democrats have picked up on the dissatisfaction, including Assembly Speaker Willie Brown of San Francisco, the governor’s off-again, on-again chief antagonist in the Legislature.

“The economy is so bad that there is nothing left to fight over,” Brown said in an interview. “We all recognize that this ship is going to sink unless we bail the water together, and that is what we are doing.”

The standing of both the Republican governor and the Democratic-dominated Legislature fell sharply last year when California went a record 63 days without a budget. Then, they sank even further by failing to agree on workers’ compensation reform.

With elections looming next year, neither side wanted a replay of the partisan fights.

Reversing tactics this session, the governor voluntarily took himself out of direct participation in developing the compromise. From a distance, he monitored developments through staff assistants and a task force of business executives and labor leaders.

The governor’s switch and a corresponding reduction in partisanship on the parts of Brown and other Democrats worked to help produce the final package, legislators and business representatives agreed.

“The governor and the Legislature were excoriated by the public in 1992 for partisanship that impeded real policy work,” Johnston said. “This year there was a higher degree of goodwill, whether borne of political necessity or personal conviction.”

Another negotiator, Republican Sen. Bill Leonard of Upland, a self-described political pessimist, conceded that the relatively swift passage of a state budget by July 1 and the cooperation on the workers’ compensation program represented a “hairline crack” in Sacramento’s long-running political paralysis.

“In last November’s election, every candidate on the ballot from both parties campaigned on a platform of workers’ compensation reform,” Leonard said. “There is a need to fulfill that commitment, by Republicans and Democrats. Every incumbent going before the voters in 1994 will say, ‘I was the key vote. Reelect me.’ ”

Brown embraced the notion of comprehensive reform of workers’ compensation at a California economic summit he sponsored last winter. In May, the powerful Speaker appointed himself to the committee that fashioned the bipartisan accord.