Workers’ Comp Reform Requires Action, Not Just Talk

Words come easy and cheap for Gov. Arnold Schwarzenegger. But they’re not always going to translate into his promised action, action, action....

The best example currently is workers’ comp reform, the biggest nonbudget issue before the Legislature. For business, it’s the biggest issue period. California’s employer-paid workers’ comp insurance premiums are the highest in the nation and double the national average.

The loudest Republican cheers in the governor’s State of the State address came when he set a March 1 deadline for passage of “real” reform -- then vowed, if the deadline isn’t met, to take a proposal “directly to the people” in November.

Off camera, sitting behind and slightly to the left of Schwarzenegger, veteran Senate leader John Burton (D-San Francisco) grumbled about a March 1 deadline being totally unrealistic. Overhearing, despite the standing GOP roar, Schwarzenegger turned to the liberal lawmaker and said calmly, confidently with a knowing smile: “You can do it.”


Sure, the Legislature can do it. It’s possible -- in the same way it’s possible for Ohio Rep. Dennis J. Kucinich to win the New Hampshire primary or for the L.A. Clippers to make the NBA playoffs. Theoretically it’s possible, but not a good bet.

More than two weeks after Schwarzenegger’s speech, hardly any progress has been made in the Capitol on workers’ comp. Hearings have not been set. Democrats are not motivated. Republicans are powerless.

Last week, the governor did convene the interest groups -- called “stakeholders” in lobby lingo (employers, insurers, doctors, unions, attorneys) -- and deliver a brief pep talk, saying he had no patience for pessimists who dismiss his deadline as impractical. But Schwarzenegger himself, understandably, has been focused elsewhere: on rallying voter support for his deficit bond and budget-balancing package on the March 2 ballot.

The March 1 deadline was chosen to give the governor’s political team enough time to collect signatures for a November ballot initiative if the Legislature refuses to act. But there’s wiggle room. The signatures don’t have to be turned in to the secretary of state until April 16.


There’s a parallel effort being waged by a Schwarzenegger ally, the Small Business Action Committee. It’s preparing an initiative that the governor easily could adopt as his own. The group’s founder and president, Joel Fox, was a Schwarzenegger policy advisor during his election campaign. Its political consultant, George Gorton, is a veteran Schwarzenegger strategist.

“We want this solved in the Legislature,” Fox says. “Nobody wants to go through a $20-million campaign in November, with everything swirling around.”

Everything like an unpredictable presidential race that will shape the voter turnout, plus an aggressive opposition campaign bankrolled by labor and workers’ comp attorneys. Opponents would try to frame the issue as business profits vs. workers’ benefits -- management vs. labor -- and there are a lot more grunts in the electorate than execs.

But Democrats would have to worry that the issue might get framed as greedy middlemen attorneys vs. struggling job-creators. Voters understand that high workers’ comp costs are squeezing out jobs, Gorton says.

It’s all extremely complicated and contentious. But the Legislature has been struggling with the issue for years. It is not an alien subject. The main reason a March 1 deadline seems a pipedream is the Capitol culture.

Big bills get passed during the summer trading season when all sides grasp for leverage, playing one issue against another. Indeed, Republicans could have achieved “real” reform last summer if they’d compromised and allowed a tax hike. If they had, there’d now be both a balanced budget and lower comp costs.

The Legislature did pass some reform last year on the final day of its session. Schwarzenegger ridiculed it as “preelection bogus,” but now agrees it was a good first step. The bill attacked medical costs by establishing fee schedules for outpatient surgical centers, limiting visits to chiropractors and repealing a vocational rehabilitation program.

It was designed to save employers about $6 billion, but is falling far short. Insurance Commissioner John Garamendi recommended a 15% rollback in premiums to reflect the reforms, but cuts have averaged only 3.6%.


Practically everyone agrees that the system is a mess -- and not just hurting business. Government is bleeding tax dollars. L.A. County has budgeted $352 million for comp this fiscal year.

Yet benefit payments for injured workers are only average for the nation. They were among the lowest until recently raised.

The governor’s goal is to whack out a third of the $30-billion statewide cost. He’d create medical standards and a review system. He’d also ensure that injuries are work-related.

Attorneys and labor -- Democratic patrons -- contend that the answer is to re-regulate workers’ comp rates. They used to be regulated when the system was semi-sound. The idea is to make sure insurers don’t pocket money generated by reforms.

Workers’ comp is the business world’s biggest gripe at Democrats. They should help the governor fix the problem. Delete it from the GOP playbook.

But Schwarzenegger also must get involved personally -- not just slough off negotiating to his staff. Lawmakers and lobbyists want to deal with this celebrity governor face to face. It’s how he can turn cheap words into valuable action.