Governor Calls Bill a Sure Deal

Gov. Arnold Schwarzenegger, declaring victory Thursday in his campaign to overhaul California’s $22-billion workers’ compensation insurance system, withdrew his threat to take the issue directly to voters in November.

Calling the Legislature’s expected passage of a sweeping bill today “a great success,” the governor claimed credit for taking a large step toward bolstering the state’s business climate.

“I’m happy to say that we’ve resolved this issue through negotiations, and not having to go through the ballot,” Schwarzenegger said.

He indicated he would probably sign the bill in a ceremony Monday.

Proponents of the initiative campaign, who raised and spent $5 million gathering 1 million signatures to qualify for the ballot, said they were awaiting formal word from the governor before canceling plans to submit petitions to the secretary of state’s office to meet a deadline at the close of business today.

“We’re at Defcon 4 and holding,” said initiative spokeswoman Beth Miller Malek, referring to the U.S. military’s highest level of alert.

Democratic legislative leaders, who have been wrangling with the governor for weeks in closed-door sessions, praised the workers’ comp bill but warned that it contained one glaring omission: It would do nothing to regulate insurance company premiums and guarantee that the expected savings go to employers.

California businesses, nonprofit organizations and local governments have been hammered by workers’ comp insurance bills that have doubled and tripled over the last few years.

Democrats, led by Assembly Speaker Fabian Nunez (D-Los Angeles) and Sen. Richard Alarcon (D-Sun Valley), said Thursday that they planned to send the governor separate pieces of legislation that would provide some type of price caps on insurance company rates.

“Rate relief has to be a critical part of the package,” Nunez said at a news conference.

Schwarzenegger, however, staunchly opposes rate regulation and probably will veto any rate-cap bill.

Assembly Minority Leader Kevin McCarthy (R-Bakersfield) called rate caps simplistic, saying it was “unrealistic to expect to snap your fingers and premiums are going to drop.”

Once Schwarzenegger definitively swept the question of rate regulation off the bargaining table this week, business and labor groups began working through their legislative partners and the governor to close an agreement. They saw the final version of the bill at a short legislative hearing -- at 3:30 a.m. Thursday -- where the bill was approved by a 6-0 committee vote, sending it to the full Legislature.

In the end, both sides seemed to conclude that, misgivings aside, the bill represented the best compromise possible. Passing a measure in the Legislature, despite the sometimes chaotic rush to meet the governor’s tight deadlines, was better than waging an expensive and divisive initiative battle this fall. Analysts predicted that such a battle -- pitting labor and attorneys against business, Schwarzenegger and insurers -- could have cost upward of $40 million.

Moreover, Democrats and their allies in organized labor concede that the governor’s bill would provide far more benefits and protections to injured workers than the ballot measure would have. The difference is like “night and day,” said Senate President Pro Tem John Burton (D-San Francisco), the governor’s chief negotiating partner.

“Clearly, he [Schwarzenegger] was not interested in the initiative, except as a last resort. And we were not interested,” Burton said.

Allan Zaremberg, president of the California Chamber of Commerce, who had been worried that the bill would go through last-minute alterations in the final negotiations, praised the final product as “an excellent package.” He predicted that savings to employers would be substantial, though specific numbers won’t be known for months. Those savings, especially from putting caps on temporary disability benefits and getting injured workers back on the job, could quickly turn up on businesses’ bottom lines, he said.

The bill, if approved by at least two-thirds of the members of both houses of the Legislature, could go into effect immediately once signed by the governor.

Tom Rankin, president of the California Labor Federation, said he was heartened by the talks with Schwarzenegger and the possibility that reforms could kick in immediately.

“We’re unhappy with a lot of the bill and happy with parts of the bill,” he said. “We understand the need for doing something through the Legislature. And we probably got more from this Republican governor than the previous two.”

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Times staff writer Robert Salladay contributed to this report.