Davis OKs Increase in Workers’ Comp

Gov. Gray Davis, flanked by labor leaders and lawyers for injured workers, signed a bill Friday granting significant hikes in benefits to people hurt on the job, the first increase in almost a decade.

Business representatives, who said they were cut out of final negotiations on the bill, warned that the increase could end up costing employers $1 billion more than the $2.4-billion annual price tag that Davis placed on the measure.

Using a Century City high-rise office construction site as a backdrop, Davis said the bill “struck the right balance” between workers’ needs and employers’ desires to keep costs in check.

The measure, AB 749 by Assemblyman Tom Calderon (D-Montebello), a candidate for insurance commissioner, calls for an overhaul of the workers’ compensation law that the administration says will pare $1.5 billion in costs from the system.

“Today, we are providing justice for working people,” Davis said. “It may be overdue. But it has arrived.”

The Democratic governor’s decision to sign Calderon’s bill cheered key supporters--labor and trial lawyers--as the state Democratic convention opened in Los Angeles and as Davis seeks reelection. He vetoed similar bills three years running, prompting organized labor to threaten an initiative this year that would have raised employers’ costs by $6 billion.

Joining Davis at the bill signing was former refinery worker Steve Duncan, who survived a 60-foot fall and burns over 40% of his body when a fire broke out at a Tosco facility in the Bay Area two years ago. Duncan receives $490 a week in workers’ compensation now. Under the new law, the weekly check will rise to $602 starting next January, and to $840 by 2006.

Beyond 2006, benefits will increase automatically based on the annual percentage that wages increase in California. The current high of $160,000 to survivors of workers killed on the job will double.

Organized labor has long sought automatic raises. In the past, when labor turned to the Legislature for benefit increases, employers could seek changes in the law limiting their costs. But with benefits rising automatically, employers could lose leverage, business representatives say.

“Another nail in the coffin of California business--especially manufacturers,” said Jack Stewart, president of the California Manufacturers and Technology Assn.

Stewart cited an analysis by the independent Workers Compensation Insurance Ratings Bureau, which estimated the cost of the benefit increases at $3.5 billion annually.

At a time when on-the-job injuries are declining, the ratings bureau recently projected the cost of workers’ compensation at $15.2 billion for 2003, without the benefit hike, up from $8 billion in 1996.

“How does a small business deal with that?” Stewart asked.

Medical care accounts for more than half the costs. The administration believes that the Calderon bill will cut costs by opening the way for major health maintenance organizations to expand into the workers’ comp field.

Davis appeared unclear on another major provision aimed at saving money for employers.

The state plans to use money from taxes levied on workers’ compensation insurance premiums to subsidize employers by paying part of the wages of injured workers who return to their jobs early.

In 2004, when the state subsidy begins, the state will contribute about $87 million in employer subsidies.

Currently, that money flows into the general fund and is used for a variety of state programs. Davis said, however, that the money does not come from the budget’s general fund, a statement later corrected by an aide.