California businesses, already reeling from higher energy costs and a slowing economy, could get hit with $4 billion to $6 billion in additional annual costs if several key bills passed by the state Legislature earlier this month get signed into law by Gov. Gray Davis.
Topping the list of bills that passed in the session’s final hours were multibillion-dollar increases in workers’ compensation and unemployment insurance benefits. Also on Davis’ desk are measures that would expand prevailing wage law and make it easier for employees to take sick leave to care for relatives.
“These bills would place very onerous costs on businesses,” said Willie Washington, a lobbyist with the California Manufacturers & Technology Association. “Remember, this comes after those record increases in energy costs and what is now a sharply slowing economy. There’s a real question here of just how much more the state’s businesses can absorb.”
But Tom Rankin, president of the California Labor Federation, said he has absolutely no sympathy for “California’s greedy employers’ associations.” “If California had indexed unemployment and workers’ comp benefits to the state’s average weekly wage, as many other states do, employers wouldn’t be facing these modest increases,” he said. “But after waiting 19 years to raise some workers’ comp benefits and since 1991 to increase unemployment benefits, employers should be expecting this.”
Since 1994, California employers have saved $24 billion “because our benefits have been so low,” he said.
By far the legislation with the largest impact on business is a pair of bills that would increase workers’ compensation benefit levels and make other changes to the state’s workers’ comp system. The main bill in the package, SB 71, by Sen. John Burton, D-San Francisco, increases weekly disability benefits 33 percent, to 85 percent, for a cumulative total of nearly $3 billion. The bill already had received lots of attention, largely because it pitted Burton, the leader of the state Senate, against Davis, who had vetoed previous workers’ comp bills in the past.
Democrat alternative
Earlier this month, Davis indicated that the bill was too costly to accept without offsetting cost reductions. So the Democratic leadership in the Legislature threw together another bill, AB 1176, by Thomas Calderon, D-Montebello, to speed up the introduction of managed care into the workers’ compensation system and to reduce the employer tab for retroactive lifetime pension benefit claims for permanently disabled workers.
But employer groups say these promised savings may not materialize.
“This trailer bill is nothing but a futile attempt to reduce a proposed benefit increase,” said Lori Kammerer, executive director of the California Coalition on Workers’ Compensation. “This whole package could end up costing employers more than $4 billion a year, and that comes after many employers have seen their worker’s comp bills double over the last couple years.”
But Calderon said employers were exaggerating the costs as part of a campaign to persuade Davis to veto the bills.
“Frankly, the increases in benefits in these bills are so pitiful that even with the increases, if you get injured on the job, you still stand to lose your home, your savings and everything,” Calderon said. “All we’re asking for is an increase of one penny per employee per hour.”
Calderon warned that if Davis doesn’t sign the package, labor unions would put a measure on next November’s ballot requiring benefit levels that are currently the second-lowest in the nation to be brought up to the national average, an increase which Calderon said would be “ten-fold or more.”
Davis said at a news conference last week that he has taken no position on the workers’ comp package, saying he needs to review some of the last-minute additions.
Also on Davis’ desk is SB 40, by Sen. Richard Alarcon, D-Van Nuys, which would increase unemployment insurance benefits up to 25 percent a year, a cumulative cost to employers of $1.1 billion annually.
Mixed view on benefits
But employer groups contend the increase could actually be much more because the bill also expands the number of people eligible to apply for unemployment insurance benefits. For example, according to CMTA lobbyist Washington, the bill allows people who worked part-time to draw on these benefits even if they are only looking for another part-time job. “This could bring in thousands of college students to the system,” Washington said.
Rankin countered that the increase in unemployment benefits would be modest, and is long overdue.
“There are states with Republican governors, like Massachusetts, where unemployment benefits are $700 a week, while our maximum benefit has been stuck at $230 a week since 1991,” he said. “This would add 100 bucks to that for claims filed after Jan. 1 next year, with additional modest increases after that, topping out at $450 in 2005.”
Rankin added that the $7 billion currently sitting in the state’s Unemployment Insurance Trust Fund would be sufficient to cover the increased unemployment benefits for the next two years, so the impact on employers would be deferred. He said the additional benefits would be an immediate stimulant for the economy.
“No unemployed worker is going to put an extra $100 a week into the bank. They’re going to spend it,” he said.
Last week, the consensus among Sacramento lobbyists was that Davis would likely sign this bill.
“Gov. Davis has shown over the last two years that he will sign one or two key bills for labor and put off consideration of others until the next year,” said Fred Main, senior vice president of the California Chamber of Commerce.
While a number of bills imposing additional costs on business did make it through to Davis’ desk, several others were stopped in the final weeks of the session.
Two bilsl that failed to clear the Legislature were SB 11, by Martha Escutia, D-Norwalk, which would have limited the use of confidential settlements to resolve lawsuits. and SB 599, which would have required health plans to cover the cost of substance abuse treatment programs.
Losses in health care
Meanwhile, in the health care arena, a number of key initiatives sought by various interest groups died or faced delays. The hospital industry was one of the biggest losers when a bill it had counted on to get a five-year extension of a 2008 deadline for earthquake proofing its facilities got put over until the next year.
The industry claims it cannot afford the $14 billion it estimates compliance with the law will cost, but the bill was delayed when legislators could not agree on an attached bond measure to assist hospitals.
Labor also suffered a defeat when a bill by Sen. Gloria Romero, D-Los Angeles, that would have barred hospitals from requiring nurses and other employees to work overtime, was delayed.
Another bill by Assemblyman Keith Richman, R-Granada Hills, which would have expanded the Healthy Families medical coverage program for the working poor, was shelved due to budgetary questions.
Staff Reporters Michael Stremfel and Laurence Darmiento contributed to this report.
