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Finance Department Comes Out in Opposition to Apportionment, RTW Fund Bills

By Greg Jones (Deputy Editor)

Tuesday, August 22, 2017 | 1868 | 0 | 0 min read

Gov. Jerry Brown’s administration has announced its opposition to bills that would prohibit apportioning permanent disability to conditions related to pregnancy and require the state to spend all of the $120 million earmarked each year for the Return-to-Work Supplement Program.

Opposition by the Department of Finance led the Senate Appropriations Committee to place the apportionment bill on its suspense file during a hearing Monday. The administration's opposition also prompted the author of the return-to-work bill to pull the measure before the hearing and place it on a two-year path.

The Senate Appropriations Committee, the only committee to meet Monday after lawmakers returned to the Capitol from their month-long summer break, also sent to its suspense file a measure that would give to school district police officers the same presumption that other police officers have regarding the compensability of certain types of injuries.

Rules of Procedure for the Senate Appropriations Committee require placing on the suspense file bills that would have a fiscal impact on the General Fund of more than $50,000, or that would have an impact on special accounts or funds of more than $150,000 in any single year. Rules for the current session require the committee to vote to remove bills from the suspense file by Sept. 1.

The Department of Finance analysis of Assembly Bill 570, by Lorena Gonzalez Fletcher, D-San Diego, estimates that prohibiting the use of pregnancy, childbirth or related medical conditions in apportionment decisions could cost employers — including the state — more than $100 million a year.

“Given that 43% of the 600,000 workers’ compensation claims filed in California each year are from women, the Department of Industrial Relations estimates that costs to employers will range from $10 million to over $100 million annually,” the analysis says.

In addition to the potential that employers may have to pay more benefits to women whose permanent disability was reduced by being apportioned to one of the conditions proscribed by the bill, the Department of Finance also said it could increase administrative costs by $1 million to $10 million a year.

“This bill could lead to increased disputes between employers and female employees concerning the cause of permanent disability, which would substantially increase the number of claims filed,” the department says in its analysis. “The Department of Industrial Relations estimates this bill creates General Fund costs of several millions of dollars to hire additional staff for the Division of Workers’ Compensation to respond to a potential increase in litigation.”

There was no testimony on the bill provided during Monday’s hearing other than a lobbyist for the California Coalition on Workers’ Compensation and California State Association of Counties saying the organizations opposed the measure. The committee moved the bill to its suspense file without deliberation.

After the hearing, Christel Schoenfelder, president of the California Applicants’ Attorneys Association, said the Department of Finance analysis of AB 570 was “nonsensical.” She said the write-up on the bill CAAA is sponsoring “inherently condones gender discrimination” in California’s workers’ compensation system.

“It almost sounds like they don’t want any female employees challenging the cause of their permanent disability,” she said. “If a woman gets injured on the job, she will file one claim. She is not going to file more claims as a result of this bill.”

Jason Marcus, CAAA’s president-elect, said he doesn’t think the measure would increase disputes or litigation over apportionment decisions. Rather, he said having a clear list of conditions that can’t be considered would reduce litigation and disputes over apportionment determinations. As a result, Marcus said AB 570 would reduce costs and result in quicker resolution of claims.

Gonzalez Fletcher’s office was not immediately available for comment about the future of her bill Monday afternoon. She could amend the measure, although it’s not clear how much more she can remove from the bill that is already much narrower in scope than last year’s AB 1643. The 2016 bill would have prohibited apportionment to pregnancy, menopause, osteoporosis or carpal tunnel syndrome.

The governor vetoed AB 1643, saying the measure would have created a broad exception to the rule that employers are liable only for the percentage of permanent disability directly caused by a work-related injury. He also said there is ample opportunity in the adjudicatory process for injured workers “to raise any concerns or allegations of improper and impermissible gender discrimination in the medical evaluation or apportionment process.”

Gonzalez Fletcher could also pull her bill from consideration for the rest of the year and hope it is met with a more favorable reception in 2018, the second year of the current legislative session.

That is the path that Assemblyman Tom Daly, D-Anaheim, is taking with his bill that would require the DIR to fully exhaust the $120 million fund each year.

Assembly Bill 553 would require the department to take any money remaining in the Return-to-Work Supplement Program account at the end of the year and divide it up equally among all injured workers who received payments during the year. The pro-rated payments would be capped at $25,000 per person, under the bill.

The Department of Finance said in its analysis it has two concerns with the bill. First, it says in its analysis that the measure would require the state to earmark $411,000 initially and $388,000 ongoing for two positions to review applications for payments from the program, “develop a formulary for pro-rated distribution to ensure that each application received the maximum benefit without exceeding $25,000,” and send out a second check.

The finance department said more time is needed to evaluate the supplemental benefit program created by Senate Bill 863.

“In addition, the allocation of additional benefits on a pro-rata basis would bear no relationship to a worker’s actual loss of earnings, which is inconsistent with the purpose of the program,” the bill analysis says.

CAAA’s Marcus questioned both of the concerns the department cited for its opposition to AB 553, a measure CAAA supports but did not sponsor.

He questioned how it could cost the state $388,000 a year to divide the money left over in the fund at the end of the year by the number of beneficiaries and mail out another check. And he questioned why applications would have to be reviewed a second time if they were already approved once when initially submitted.

“That amount is clearly excessive,” he said.

Marcus also said current payments from the Return-to-Work Supplement Program have no relationship to a worker’s actual lost earnings.

Currently, injured workers who are eligible for Supplemental Job Displacement Benefit vouchers are also eligible for a $5,000 payment from the return-to-work program.

Marcus said the benefit amount is “a completely arbitrary number” that was based on Rand’s initial estimates that as many as 24,000 injured workers would be eligible for payments from the fund each year.

“They explicitly came up with the simple $5,000-to-every-worker-who-applies formula to avoid having to deal with each worker’s individualized earnings loss,” Marcus said. “Pursuant to the Rand study, every worker who does not return to their pre-injury job suffers a disproportionate earnings loss regardless of their permanent disability.”

Jesse Ceniceros, president of Voters Injured at Work, said Monday that the $5,000 payment was based on Rand’s estimates as well as a desire to get money into the hands of injured workers as quickly as possible.

In addition to estimating that up to 24,000 injured workers might apply for payments, Rand said basing payments on actual earnings losses would require injured workers to wait several years to allow for a comparison of pre-injury and post-injury earnings.

Ceniceros said he was not surprised that the Department of Finance would oppose the bill and call for further studies. He said the administration’s position appears to be that most proposed work comp changes require additional study, although in this case, Ceniceros said he doesn’t know what more there is to evaluate.

The DIR paid out nearly $19 million from the fund in 2015, and more than $65 million in 2016. But rather than rolling the money over and growing the account for subsequent years, the DIR applies remaining funds to the next year’s allocation and assesses employers only the amount needed to increase the account balance to $120 million.

The practice of using the remaining funds form one year to hold down the assessment for the next was endorsed by the Legislative Counsel Bureau in 2015, according to an opinion that applicants’ attorney Julius Young obtained and posted to his Workers Comp Zone blog.

The Senate Appropriations Committee on Monday also placed a hold on AB 1028, by Raul Bocanegra, D-Pacoima. The measure would extend to school district police officers the same presumption that is enjoyed by city police officers, county sheriffs and deputies, and the California Highway Patrol. The bill would create the presumption that hernias, heart trouble, cancer, tuberculosis, meningitis and lower back impairments are occupational injuries for school district police officers.

The Department of Finance says the measure “will result in substantial costs to local governments and state agencies,” but “it is difficult to estimate the financial burden this legislation would place on employers.” The agency predicts costs for the bill could be as high as $10 million a year.

In addition to its cost concerns, the Department of Finance also cited the governor’s skepticism regarding presumptions expressed in a 2014 veto message of a bill that would have extended the police officer presumption to anyone meeting the Penal Code definition of “peace officer.”

In vetoing AB 2052 in 2014, Brown said there was no evidence that the workers who would be covered under the expanded presumption confront the same hazards that gave rise to the presumption in the first place. And he said “presumptions should be used rarely and only when justified by clear and convincing scientific evidence.”

Comments

George Corson Aug 22, 2017 05:36 AM

Exhausting the RTW Fund through more extensive income redistribution is the dumbest idea I have seen in years. At what level does it make sense to blindly spend tax dollars merely because they have been segregated? If you apply for Social Security, the SSA does not hunt you down and say "Hey, more people died this year than we expected, so we are going to give their share to you." No, tax money should not be taken from companies and individuals for actual income redistribution. The RTW Supplement is a WC benefit, but it is not necessary to exhaust the fund in the absence of qualified Applicants. I agree that 5K will not change a life, but it will help seed a start.

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Chris Ben Aug 22, 2017 09:34 AM

The fund was created to offset the large cut in PD. The $120 million was a compromise amount, the money lost in the PD cut was much greater then $120 million a year. Now they are cutting the $120 million per year. That was not the legislative intent.

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Kevin Combes Aug 22, 2017 01:49 PM

The funds in question are not generated from "tax" revenue but rather from surcharges paid by policy holders. However, I agree that a redistribution plan as stated may not be the best utilization of these funds. More indepth analysis seems necessary to ensure the broadest benefit for both policy holders and injured employees.

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