As the state Legislature reconvenes this week for its final month-long flurry of bills this session, measures are on the table that could cost California businesses more than $5 billion over the next several years if they are passed and signed into law by Gov. Gray Davis.
Topping that list is a $2.5 billion increase in workers’ compensation benefits, a $1 billion increase in unemployment insurance benefits and the prospect of $1 billion or more in future electricity rate increases to bail out Southern California Edison with businesses picking up the tab for all these.
At the beginning of this year’s session, with the state in the depths of the energy crisis, there was a widespread belief that there would be a small number of non-energy bills introduced. And fewer bills were indeed put forward and far fewer cleared their houses of origin this past spring.
But several of the bills that have made it through the hurdles are causing consternation among business lobbyists.
“This year stacks up as potentially one of the worst in recent years for business,” said Gino DiCaro, a spokesman for the California Manufacturers and Technology Association. “It’s hard enough to absorb these extra billions in costs in good times; now, with a slowing economy, if these bills are signed into law, our member companies will be in a panic mode.”
DiCaro noted that many businesses already are struggling with electricity rate increases ranging from 50 percent to 180 percent, along with sharply higher workers’ comp and medical premiums.
In past years, Davis vetoed increases in workers’ comp and unemployment insurance benefits, saying that the hikes were too big for businesses. The measures being considered this week are virtually identical in scope to those vetoed bills, although they could be whittled down in the intense negotiations that always take place in the closing days of the session.
Specifically, the workers’ comp legislation calls for benefit increases ranging from 33 percent to 85 percent over the next five years.
There is one new twist in the bill: a so-called “catastrophe fund” for permanently disabled workers that one business lobbyist likened to a lifetime pension.
“Proponents claim that this provision will only cost $50 million, but since a single lifetime pension could easily go above $1 million, the total cost could quickly reach hundreds of millions of dollars,” said Lori Kammerer, managing director of the California Coalition on Workers’ Compensation, an employer lobby group.
But labor officials say that the current lifetime pension levels are way too low. “These are people who will never be able to work again and right now, they’re getting paid poverty-level benefits,” said Tom Rankin, president of the California Labor Federation.
Furthermore, Rankin said, the additional benefits would be pumped right back into the economy in the form of rental and mortgage payments and food purchases.
“Even with these increases, the total cost to employers remains at a historically low 2 percent of payroll; 10 years ago the cost was 4 percent of payroll,” Rankin said.
Lobbyists note that this year, the workers’ comp benefit increase bill is being carried by Senate President John Burton, D-San Francisco, widely considered the most powerful legislator in Sacramento. They say that Davis may not be willing to risk a showdown with Burton because he needs the legislator’s support on the Edison rescue package and other key legislation.
Last week, speculation was mounting that Davis would cut a deal with Burton. That might involve keeping a lid on workers’ comp benefits, but hiking the unemployment insurance benefits.
Meanwhile, the other big-ticket item on the agenda is the Edison rescue package. Starting last summer and continuing through January when the state took over buying electricity from the insolvent investor-owned utilities, Edison racked up some $3.5 billion in debts to power suppliers. (Pacific Gas & Electric ran up even more debts, but it filed for Chapter 11 bankruptcy protection on April 6.)
The process of coming up with a rescue package has proven highly contentious, with Davis’ plan to have the state buy Edison’s transmission lines now appearing almost dead.
Whatever rescue package, if any, is cobbled together, two aspects could impact California employers. One is the insistence among a growing number of legislators to have major energy users pick up the bulk of the $3.5 billion tab, which could hit large manufacturers “really hard on the bottom line,” said the CMTA’s DiCaro.
The other is the possible reinstatement of a provision to allow major energy users to choose their power providers.