State business leaders are breathing a sigh of relief after the first two-year session of the Democrat-controlled Legislature resulted in only a handful of bills impacting their pocketbooks being sent to the desk of Gov. Gray Davis.
The Legislature did pass a $1.5 billion increase in workers’ compensation benefit payments which many expect Davis to veto and a $1 billion increase in unemployment benefits. If approved, the cost of those increases would ultimately be paid by employers through higher insurance premiums or surcharges.
However, dozens of other bills opposed by business died or were watered down in the final weeks of the legislative session.
Among these were measures that would have prohibited mandatory arbitration clauses in employment contracts, expanded the state’s Family and Medical Leave Act, and made shareholders liable for a public company’s wage and hour violations.
“Considering that we were mostly in a defensive mode, it wasn’t a bad session,” said Jack Stewart, president of the California Manufacturers and Technology Association. “It could have been a lot worse.”
Business lobbyists and political observers credit flush state coffers, a governor committed to holding a centrist position, and the continued influence of a group of moderate Democrats for holding back a flood of legislation that would have been costly to business.
But that doesn’t mean that labor and trial attorneys traditional opponents of business came away empty-handed. In fact, labor succeeded in getting several key bills passed. Along with the workers’ comp and unemployment insurance benefit increases, labor pushed through a bill stiffening penalties against companies that violate wage and hour laws, and another bill prohibiting employers from using state contract dollars for anti-union activities.
“We went in with high expectations in terms of getting our agenda passed and, by and large, those expectations were met,” said Tom Rankin, president of the California Labor Federation. “Now it’s up to Gov. Davis.”
The governor has until Sept. 30 to sign or veto these bills.
Quackenbush fallout
Thanks to the scandal surrounding former Insurance Commissioner Chuck Quackenbush, trial attorneys also got several significant bills passed. One bill, SB 1805 sponsored by Sen. Martha Escutia, D-Montebello, requires that all investigations of insurance company practices be made public.
However, a bill pushed by trial lawyers was killed early in the session. That measure, which would have raised physician malpractice damage limits, died in committee.
Lobbyists say many labor bills got through the Legislature because negotiations between labor and business representatives broke down, especially on the big-ticket items like the workers’ comp benefit increase.
“There was no sense of real dialogue with labor,” said Fred Main, senior vice president of the California Chamber of Commerce. “They basically drew a line in the sand, flexed their lobbying muscle with key legislators and are daring Davis to veto these bills.”
Rankin of the California Labor Federation said that on some key issues, labor groups felt there could be no compromise.
“Look, there is a real need out there for this legislation,” he said. “The situation here is extreme. California ranks dead last or close to it in so many categories when it comes to wages and benefits. These bills merely take us to the middle of the pack.”
In other areas, though, there was compromise. For instance, a number of environmental bills that appeared to be costly for business made it through after being watered down. Prodded by a group of moderate Democrats and the Davis administration, environmentalists did agree to negotiate with business interests on many of these bills.
“As was the case last year, a moderate bloc of Democrats, mostly from the Central Valley, flexed their muscles, especially in the environmental area,” said the chamber’s Main. “Very few bills that we initially regarded as bad for business made it through in a bad form.”
One such bill, AB 2646 by Assemblyman Thomas Calderon, D-Montebello, would have made anyone discharging waste into rivers and lakes liable for cleanup costs. After business opposition and extensive negotiations, that provision was dropped and the bill was amended to expand the authority of public water agencies to investigate the sources of pollution in their waterways.
Central Valley influence
However, Main said, many of these Central Valley Democrats voted with labor, which he said helps explain why many labor-backed bills ultimately made it through.
Another issue of concern for business groups has been the electricity deregulation crisis. Electricity prices have soared in San Diego and spread to Los Angeles and elsewhere as the market has been hit with a huge power shortfall. As a result, calls mounted for the industry deregulation to be reversed.
But the state’s major corporate power users who had pushed for deregulation in the first place five years ago in an attempt to lower power prices feared that tampering too much with the state’s power structure would cause more harm than good.
“We didn’t want the Legislature to re-regulate electricity deregulation,” said Stewart of the California Manufacturers and Technology Association. “Rather, we preferred that the situation in San Diego be fixed with some sort of temporary Band-Aid and then the power plant approval process be streamlined. The key to solving this crisis is getting new power plants on the grid. We were pleased that the Legislature saw things our way on this.”
The Legislature approved immediate rate cuts retroactive to June 1 and also the setting aside of $150 million to cover some of the losses San Diego Gas & Electric is expected to incur as a result of the mandated rate cuts. Other measures were approved to fast-track construction of new power plants. Davis has signed the rate cut and power plant construction bills; he remains undecided on the SDG & E; bailout measure.
