HomeMy WebLinkAbout2004-03-09 - AGENDA REPORTS - WORKERS COMPENSATION REFORM (2)Agenda Item:
CITY OF SANTA CLARITA
AGENDA REPORT
CONSENT CALENDAR City Manager Approval:
Item to be presented by: Mayor Kellar
DATE: March 9, 2004
SUBJECT: STATE LEGISLATION: WORKERS' COMPENSATION REFORM
DEPARTMENT: City Manager
RECOMMENDED ACTION
Adopt resolution urging the California Legislature and Governor Schwarzenegger to enact
comprehensive workers' compensation reform legislation in 2004. Copies of the resolution shall
be transmitted to Santa Clarita's state legislative delegation, Governor Schwarzenegger,
appropriate legislative committees and the League of California Cities.
BACKGROUND
The California workers' compensation system was originally instituted to provide workers
injured on the job an avenue to receive medical treatment and replacement of lost wages.
Existing law provides for medical treatment, payments to injured workers for temporary and
permanent disabilities, vocational rehabilitation for injured workers unable to return to their
former jobs, and even death benefits for the dependents of workers who die as a result of work
related injuries.
Over time, the system has become difficult to manage in terms of the large number of
questionable and fraudulent claims and the substantial increases in premiums employers are
required to pay. Employers in California pay the highest workers' compensation costs in the
country. At the same time, however, injured workers receiving benefit payments are receiving
amounts which are among the lowest in the nation. Some of the reasons cited for the spiraling
costs include prolonged and unnecessary medical treatments for some patients, subjective
disability allowances which under -compensate severely injured workers and over -compensate
claimants with minor injuries, and increasing legal costs. Also, the number of companies
offering workers' compensation insurance in California has dwindled in recent years, leaving the
State Compensation Insurance Fund as the provider for over 50% of the market.
Adopted:lLLP�--� 6
On his second day in office, November 18, 2003, Governor Arnold Schwarzenegger called the
California Legislature into special session to address the workers' compensation crisis. At the
present time, there are approximately 26 bills dealing with specific elements of workers'
compensation. Governor Schwarzenegger has indicated that if the Legislature is unable to
deliver substantial and meaningful workers' compensation reform legislation by March 1, 2004,
he will lead an initiative drive to place reform measures on the November 2004 ballot.
Currently, 43 states have rates that average less than three percent of payroll. Of the remaining
seven states, California is in first position with workers' compensation costs at approximately six
percent of payroll. For example, California employers, on average, pay $5.85 in workers'
compensation premiums per $100 of payroll, which is 184% more than employers pay in the
State of Oregon. In 2003, Oregon's governor sent letters to 250 California companies urging
them to relocate to Oregon, specifically citing the workers' compensation insurance issue.
The workers' compensation crisis is not only a private sector concern. Public agencies and
non-profit agencies are being hit with the same double digit premium increases as private
industry. For example, the City of Santa Clarita Human Resources Division received a premium
increase of 41% for 2003/04, having already received premium increases of 17% in 2002/03 and
23% in 2001/02. Over the past five years, the City of Santa Clarita's annual workers'
compensation insurance premium has more than doubled from $376,000 in 1999/2000 to
$813,000 in 2003/04. In calendar year 2003, Santa Clarita's workers' compensation claims fell
by 25% while the insurance premium for the following year increased by 41%.
The California Chamber of Commerce has been leading the fight on behalf of all California
employers to encourage the Legislature and the Governor to adopt meaningful and
comprehensive workers' compensation reform this year. The League of California Cities has
been a strong advocate for reform, citing the increasing costs to cities at the expense of providing
enhanced constituent services.
The staff recommends that the City Council adopt the attached resolution which requests that the
California Legislature and Governor Schwarzenegger enact meaningful and substantial workers'
compensation reform this year. The City of Santa Clarita will be working through the League of
California Cities to comment on the local impacts of specific proposals as they are presented for
consideration. The overall goals of workers' compensation reform should recognize the
importance of controlling costs while at the same time providing workers injured on the job with
an appropriate level of benefits.
ALTERNATIVE ACTIONS
1. Do not adopt resolution supporting workers' compensation reform.
2. Other action as determined by the City Council.
FISCAL IMPACT
Adoption of the staff recommendation does not require additional resources as all actions
necessary to communicate the City's position are contained within the adopted 2003/04 City
budget.
ATTACHMENTS
Resolution