Privatize the State Settlement Insurance Coverage Fund – OCRegister

9January 2020

The Los Angeles Times just recently released a scathing short article about claims of extreme executive incomes and nepotism at the State Fund, a quasi-governmental company that is one of the biggest providers of workers’ compensation coverage in the state.

In the beginning look the story looked like organization as usual: more waste, scams and abuse of taxpayer cash. A much deeper read actually recommends a less major issue.

It is still time for the state to think about the very future of this company that’s invested much of its history engulfed in controversy.

As the Times reported, incomes for seven executives at the State Fund surpassed $500,000 each year, making them a few of the highest-paid public workers in California. By contrast, the guv makes money $210,000 a year.

Include some light claims of nepotism, critics calling the incomes “beyond the pale” and a lawmaker requiring an oversight hearing and you have the makings of a standard Sacramento scandal.

Looking deeper though, we find the incomes are not paid by the government, which lets some air out of the outrage balloon. As far as the nepotism was concerned, one boy of the CEO was making $50,400 each year as another boy and an underwriter had previously made $16 an hour as an intern.

Inappropriate? Probably, but as far as scandals go, it lacks the criminal investigation that serves as the State Fund-scandal benchmark. It’s doesn’t even come close the scandals surrounding Ricardo Lara, the state’s insurance coverage commissioner. But it does raise a great question about why the State Fund is still connected to the government in any way.

The State Fund is considered quasi-governmental since its board is openly appointed (it’s frequently a cushy landing area for former legislators and other well-connected types) and since it has a required to supply insurance coverage no matter what, a market of last option.

The State Fund exists since California is a no-fault state where employers need to pay workers’ compensation claims and, in exchange, workers can’t sue the employer for fault. Someone required to insure the previously uninsurable.

But times have changed. There are other options. West Virginia, for example, transferred to a competitive market with an assigned-risk pool and it appears to be working fine. And that’s a state that was previously based on coal mining. In other words, a costly location to supply coverage.

The State Fund wants to pay its executives like executives in the private market and has actually requested waivers from particular civil service requirements. Maybe it’s time to reconsider its quasi-governmental status and privatize this company, which actually wants to be private. This would offer legislators one less cushy location to pursue life in the Legislature, but the state would make it through.

Public employee unions would have a fit since State Fund’s roughly 4,200 workers are eligible for public pensions, but the state would make it through that, too.

Lawmakers would argue that the State Fund’s quasi-governmental status makes it based on examination, like legal oversight and sunlight laws. But if there’s something both the Times story and recent history have shown, it’s that oversight isn’t actually taking place and if it is, it’s not effective.

Maybe it’s time offer the State Fund its dream and privatize it.Source:

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